Social Choice

Abstract

The concept of Pareto optimality leads to situations in which it is impossible to make someone better off without making others worse off. Moreover it offers no guidance on the choice involved in making some better off and some worse off. In Chapter 3 we discussed welfare criteria that provide sufficient conditions for social improvement. But the results we obtained there are still incomplete in two aspects. First, we have no answer for cases in which the compensation test is met but the distributional one is not, and vice versa. Second, the criterion that we find acceptable (Little’s Criterion) is based on judgments about distributional desirability. How do we reach such judgments? In Chapter 4 the discussion of the magnitude of welfare changes reduces (but not completely) the inadequacy of Chapter 3 in respect of the first aspect. But the incompleteness of the second aspect has yet to be overcome. The vacuum can be filled by a specific social welfare function (SWF), but how do we obtain such a function? A dictator might say that ‘The SWF should just be my preference function. Whatever I prefer or whatever I think is good for society should prevail.’ But a dictated solution is not palatable to most people.