Welfare vs. Utility

Franz Dietrich ()
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Franz Dietrich: Centre d'Economie de la Sorbonne, Université Paris 1 Panthéon-Sorbonne, Paris School of Economics, CNRS, http://www.franzdietrich.net

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

Abstract: Economists routinely measure individual welfare by (von-Neumann-Morgenstern) utility,for instance when analysing welfare intensity, social welfare, or welfare inequality. Is this welfare measure justified? Natural working hypotheses turn out to imply a different measure. It overcomes familiar problems of utility, by faithfully capturing non-ordinal welfare features, such as welfare intensity ?despite still resting on purely ordinal evidence, such as revealed preferences or self-reported welfare comparisons. Social welfare analysis changes when based on this new individual welfare measure rather than utility. For instance, Harsanyi?s ?utilitarian theorem?now supports prioritarianism. We compare the standard utility-based versions of utilitarianism and prioritarianism with new versions based on our welfare measure. We show that utility is a hybrid object, determined by two rival in?uences: welfare, and the attitude to intrinsic risk, i.e., to risk in welfare. A new version of Harsanyi?s theorem shows that Harsanyi implicitly makes the questionable assumption that society is neutral to intrinsic risk, even when all individuals are averse to intrinsic risk

Keywords: welfare; utility; risk attitude; social welfare; utilitarianism; Harsanyi-Sen debate; Harsanyi's Theorem (search for similar items in EconPapers)
JEL-codes: D00 D60 D63 D69 D70 D80 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2025-01, Revised 2025-11
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