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A note on welfarist versus non-welfarist social welfare function

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Abstract

In this short paper, we build a simple model where a non-welfarist social welfare function can be transformed into and thus be identical to a welfarist social welfare function in form. Our analysis first suggests that non-welfarist methods of policy assessment can also obey the Pareto principle. More broadly, our analysis is a useful input in thinking rigorously about the formal underpinnings of standard welfare economics.

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Notes

  1. Their article has far-reaching implications for many academic fields (e.g., economics, law, philosophy, ethics, political science, and public policy) and people (e.g., economists, legal experts, philosophers, ethicists, political scientists, and policymakers). See, e.g., the relevant discussion in Suzumura (2011).

  2. Fleurbaey et al. (2003) probably have reached the same conclusion that the assertion made by Kaplow and Shavell (2001) is false by stating that “welfarism and the Pareto indifference condition are equivalent” is false because “no Pareto condition by itself entails welfarism” (p. 1383). Our argument is clearly different from theirs. Specifically, Fluerbaey et al. (2003) argued that the assertion made by Kaplow and Shavell (2001) does not hold in the multi-profile approach to normative issues, while we show that it is false even in the single-profile approach to normative issues as assumed by Kaplow and Shavell (2001). Therefore, our critique is more direct and more on the point.

  3. The “observation” made by Kaplow and Shavell (2001) on p.283 says that “A social welfare function \(F\) is not individualistic if and only if there exist \(x,\hspace{0.33em}x{\prime}\in X\) such that \({U}_{i}\left(x\right)={U}_{i}\left(x{\prime}\right)\) for all \(i\) and \(F\left(x\right)\ne F\left(x{\prime}\right)\).” It is important to note that Kaplow and Shavell (2001) did not prove that their “observation” is true, but simply said that “The reader may verify that the following statement is true” (p. 283). We show that their “observation” is false.

  4. Note that Aronsson and Johansson-Stenman (2018) have explored alternative comparison forms and measures of reference consumption and identified several cases where the marginal tax rules are identical between welfarist and non-welfarist governments. We think these cases are special, as suggested by the other studies cited herein.

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Acknowledgement

The views expressed herein are those of the author and do not necessarily represent the views of the IMF, its Executive Board, or IMF management. The author would like to thank Alan J. Auerbach, Ronald B. Davies (the editor of this journal), Feila Zhang, and an anonymous reviewer for helpful comments.

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Zhiyong An made all the contribution to this paper.

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An, Z. A note on welfarist versus non-welfarist social welfare function. Int Tax Public Finance (2023). https://doi.org/10.1007/s10797-023-09790-0

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