The Incentive Costs of Welfare Judgments

Thomas Daske ()

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: This paper draws an incentive-theoretical perspective on the concept of social welfare. In a simple mechanism-design framework, agents' interpersonal preferences and private payoffs are all subject to asymmetric information. Under reasonable normative assumptions, the following result is established: A policy can be implemented with a budget-balanced mechanism if and only if it is consistent with materialistic utilitarianism, which seeks to maximize aggregate material wealth, not utility. Any other policy, to be implementable, must violate budget balance and therefore comes at incentive costs. The corresponding mechanism is virtually unique, which allows for conclusions upon distributive and procedural justice.

Keywords: mechanism design; social welfare; distributive justice; procedural justice; utilitarianism; dictatorship (search for similar items in EconPapers)
JEL-codes: C78 D60 D82 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-des and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:230318

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