Welfare vs. Utility

Franz Dietrich ()
Additional contact information
Franz Dietrich: Centre d'Economie de la 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 information, 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 influences: welfare and the attitude to intrinsic risk, i.e., to risk in welfare. A new version of Harsanyi's theorem shows that Harsanyi makes the questionable implicit assumption that society is neutral to intrinsic risk, overruling people's risk attitudes. We thus propose risk-impartial utilitarianism, which adopts people's (average) risk attitude

Keywords: welfare; utility; risk attitude; social welfare; utilitarianism; Harsanyi-Sen debate; Harsanyi's Theorem; Bernoulli's hypothesis (search for similar items in EconPapers)
JEL-codes: D00 D60 D63 D69 D70 D80 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2025-01, Revised 2026-03
References: Add references at CitEc
Citations:

Downloads: (external link)
https://shs.hal.science/halshs-04974689 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:25003rrr

Access Statistics for this paper

More papers in Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne Contact information at EDIRC.
Bibliographic data for series maintained by Lucie Label ().