Welfare vs. Utility

Franz Dietrich

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: Ever since the Harsanyi-Sen debate, it is controversial whether someone's welfare should be measured by her von-Neumann-Morgenstern (VNM) utility, for instance when analysing welfare intensity, social welfare, interpersonal welfare comparisons, or welfare inequality. We prove that natural working hypotheses lead to a di¤erent welfare measure. It addresses familiar concerns about VNM utility, by faithfully capturing non-ordinal welfare features such as welfare intensity, despite resting on purely ordinal evidence such as revealed preferences or self-reported welfare comparisons. Using this welfare measure instead of VNM utility alters social welfare analysis for instance, Harsanyi's 'utilitarian theorem' now effectively supports prioritarianism. VNM utility is shown to be a hybrid object, determined by an interplay of two factors: welfare and attitude to intrinsic risk, i.e., to risk in welfare rather than outcomes

Keywords: welfare; utility; social welfare; utilitarianism; Harsanyi-Sen debate (search for similar items in EconPapers)
JEL-codes: D00 D60 D63 D69 D70 D80 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2025-01
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:25003

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