Advertisement

Theory and Decision

, Volume 68, Issue 4, pp 405–415 | Cite as

Individual fairness in Harsanyi’s utilitarianism: operationalizing all-inclusive utility

  • Stefan T. TrautmannEmail author
Open Access
Article

Abstract

Fairness can be incorporated into Harsanyi’s utilitarianism through all-inclusive utility. This retains the normative assumptions of expected utility and Pareto-efficiency, and relates fairness to individual preferences. It makes utilitarianism unfalsifiable, however, if agents’ all-inclusive utilities are not explicitly specified. This note proposes a two-stage model to make utilitarian welfare analysis falsifiable by specifying all-inclusive utilities explicitly through models of individual fairness preferences. The approach is applied to include fairness in widely discussed allocation examples.

Keywords

Utilitarianism Outcome fairness Process fairness All-inclusive utility 

Notes

Acknowledgements

I am grateful to Peter P.Wakker and seminar participants at the Decision and Uncertainty Workshop 2006 in Paris and FUR XII in Rome for helpful comments.

Open Access

This article is distributed under the terms of the Creative Commons Attribution Noncommercial License which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.

References

  1. Abdellaoui M. (2000) Parameter-free elicitation of utility and probability weighting functions. Management Science 46(11): 1497–1512CrossRefGoogle Scholar
  2. Binmore K. (1994) Game theory and the social contract volume I: Playing fair. MIT Press, Cambridge, MassGoogle Scholar
  3. Bolton G.E., Ockenfels A. (2000) ERC: A theory of equity, reciprocity, and competition. American Economic Review 90(1): 166–193Google Scholar
  4. Bolton G.E., Brandts J., Ockenfels A. (2005) Fair procedures: Evidence from games involving lotteries. Economic Journal 115: 1054–1076CrossRefGoogle Scholar
  5. Broome J. (1991) Weighing goods—equality, uncertainty and time. Basil Blackwell, Cambridge, MassGoogle Scholar
  6. Camerer C.F., Fehr E. (2004). Measuring social norms and preferences using experimental games: A guide for social scientists. In: Henrich J.P., Boyd R., Bowles S., Camerer C.F., Fehr E., Gintis H. (eds). Foundations of human sociology—economic experiments and ethnographic evidence from 15 small-scale societies. Oxford, Oxford University Press, pp. 55–95Google Scholar
  7. Charness G., Rabin M. (2002) Understanding social preferences with simple tests. Quarterly Journal of Economics 117(3): 817–869CrossRefGoogle Scholar
  8. Cox J.C., Deck C.A. (2005) On the nature of reciprocal motives. Economic Inquiry 43(3): 623–635CrossRefGoogle Scholar
  9. Diamond P.A. (1967) Cardinal welfare, individualistic ethics, and interpersonal comparisons of utility: Comment. Journal of Political Economy 75(5): 765–766CrossRefGoogle Scholar
  10. Diecidue E. (2006) Deriving Harsanyi’s utilitarianism from De Finetti’s book-making argument. Theory and Decision 61(4): 363–371CrossRefGoogle Scholar
  11. Epstein L.G., Segal U. (1992) Quadratic social welfare functions. Journal of Political Economy 100(4): 691–712CrossRefGoogle Scholar
  12. Fehr E., Schmidt K. (1999) A theory of fairness, competition and cooperation. Quarterly Journal of Economics 114(3): 817–868CrossRefGoogle Scholar
  13. Fischer, J. A., & Torgler, B. (2006). Does envy destroy social fundamentals? The impact of relative income position on social capital. UK: LSE.Google Scholar
  14. Gächter S., Riedl A. (2006) Dividing justly in bargaining problems with claims: Normative judgments and actual negotiations. Social Choice and Welfare 27(3): 571–594CrossRefGoogle Scholar
  15. Grant, S., Kajii, A., Polak, B., & Safra, Z. (2006). Generalized utilitarianism and Harsanyi’s impartial observer theorem. UCLA.Google Scholar
  16. Harsanyi J.C. (1955) Cardinal welfare, individualistic ethics, and interpersonal comparisons of utility. Journal of Political Economy 63(4): 309–321CrossRefGoogle Scholar
  17. Karni E. (1996) Social welfare functions and fairness. Social Choice and Welfare 13(4): 487–496CrossRefGoogle Scholar
  18. Karni E., Safra Z. (2002) Individual sense of justice: A utility representation. Econometrica 70(1): 263–284CrossRefGoogle Scholar
  19. Keeney R.L., Raiffa H. (1976) Decisions with multiple objectives. Wiley, New YorkGoogle Scholar
  20. Kelsey D. (1994) Maxmin expected utility and weight of evidence. Oxford Economic Papers 46(3): 425–444Google Scholar
  21. Krawczyk, M. W. (2007). A model of procedural and distributive fairness. The Netherlands: University of Amsterdam.Google Scholar
  22. Luce R.D., Raiffa H. (1957) Games and decisions. Wiley, New YorkGoogle Scholar
  23. Machina M.J. (1984) Temporal risk and the nature of induced preferences. Journal of Economic Theory 33(2): 199–231CrossRefGoogle Scholar
  24. Machina M.J. (1989) Dynamic consistency and non-expected utility models of choice under uncertainty. Journal of Economic Literature 27(4): 1622–1668Google Scholar
  25. Rohde, K. I. M. (2007). A preference foundation for Fehr and Schmidt’s model of inequality aversion. The Netherlands: Erasmus University Rotterdam.Google Scholar
  26. Sugden R. (2000). The motivating power of expectations. In: Nida-Rümelin J., Spohn W. (eds). Rationality, rules, and structure. Dordrecht, the Netherlands, Kluwer Academic, pp. 103–129Google Scholar
  27. Traub, S., Seidl, C., & Schmidt, U. (2006). An experimental study on individual choice, social welfare and social preference. Germany: University of Kiel.Google Scholar
  28. Trautmann, S. T. (2007). Fehr–Schmidt process fairness and dynamic consistency. The Netherlands: Erasmus University Rotterdam.Google Scholar
  29. Van Winden F. (2007) Affect and fairness in economics. Social Justice Research 20(1): 35–52CrossRefGoogle Scholar
  30. Wakker P.P., Deneffe D. (1996) Eliciting von Neumann–Morgenstern utilities when probabilities are distorted or unknown. Management Science 42(8): 1131–1150CrossRefGoogle Scholar
  31. Wakker P.P., Zank H. (1999) State dependent expected utility for Savage’s state space. Mathematics of Operations Research 24(1): 8–34CrossRefGoogle Scholar
  32. Zank H. (2007) Social welfare functions with a reference income. Social Choice and Welfare 28(4): 609–636CrossRefGoogle Scholar

Copyright information

© The Author(s) 2008

Authors and Affiliations

  1. 1.Econometric InstituteErasmus University RotterdamRotterdamThe Netherlands

Personalised recommendations