Distributive Justice Lecture 3: Welfarism 2

Home , Social welfare function

Hilde Bojer www.folk.uio.no/hbojer [email protected]

January 31, 2013 Distributive Justice Lecture 3: Welfarism 2

Ethical properties of utilitarianism

The utilitarian social welfare function

Why utilitarianism?

General social welfare function

Economics and utilitarianism

Economics and welfarism Distributive Justice Lecture 3: Welfarism 2 Ethical properties of utilitarianism

Ethical properties of utilitarianism

3 1. Ethical equality 2. Ethical individualism 3. Humanism 4. Respect for preferences 5. Consequentialism Distributive Justice Lecture 3: Welfarism 2 Ethical properties of utilitarianism

Ethical properties of utilitarianism cont

4 Comments: 1. Ethical equality: All individuals count equally 2. Ethical individualism

I No group rights (or wrongs)

I No common good alternative: Communitarianism Distributive Justice Lecture 3: Welfarism 2 Ethical properties of utilitarianism

Ethical individualism

5 Does not imply that utilitarianism excludes public goods deﬁnition of public goods? individual goods? Public goods: e.g. Environment Defence Public transportation etc etc The environment is relevant to the extent that it aﬀects the welfare of one or more individuals As are other public goods Distributive Justice Lecture 3: Welfarism 2 Ethical properties of utilitarianism

6 3. Humanism Or anthropocentrism It is HUMAN welfare that counts Animals and nature to the extent that they aﬀect the welfare of individual humans Not all utilitarians will agree Is it possible to include the welfare of animals in total welfare? Distributive Justice Lecture 3: Welfarism 2 Ethical properties of utilitarianism

7 4. Respect for preferences All preferences? Children? Animals? Distributive Justice Lecture 3: Welfarism 2 Ethical properties of utilitarianism

8 Distinguished utilitarian: John Harsanyi: Anti-social preferences should not be included But how do we decide which preferences to respect and which to ignore? And who decides? Distributive Justice Lecture 3: Welfarism 2 Ethical properties of utilitarianism

9 5. Consequentialism Consequential justice If the result (consequence) is just, the act is just Opposite to procedural justice (deontological ethics) The result is just if and only if the procedure is just Not always a clear distinction: Rule utilitarianism Act utilitarianism Which preferences should decide on the rules? (If society shapes preferences) Distributive Justice Lecture 3: Welfarism 2 Ethical properties of utilitarianism

10 Telling lies?? Distributive Justice Lecture 3: Welfarism 2 Ethical properties of utilitarianism

The social welfare function

11 Represents an ordering or ranking of the states of society expressed mathematically as a real function i.e as a number the higher the number, the better the state. Is always derived from the individual utilities Distributive Justice Lecture 3: Welfarism 2 The utilitarian social welfare function

The utilitarian social welfare function 12 Distributive Justice Lecture 3: Welfarism 2 The utilitarian social welfare function

Properties of utilitarian SWF

13 Pareto principle If one person is better oﬀ without someone else being worse oﬀ, social welfare always increases the state of society is better Inequality neutral For a given sum of utilities, all distributions are equally good Social welfare can only increase by more utility, never by redistribution of UTILITY BUT: sum of utilities can increase by redistribution of INCOME if marginal utilities unequal Distributive Justice Lecture 3: Welfarism 2 Why utilitarianism?

Why utilitarianism?

14 Rational choice from behind a veil of uncertainty (Harsanyi) Consistent with general theory for choice under uncertainty Maximising expected utility is the same as maximising average utility (If interested, please see appendix in Bojer) Distributive Justice Lecture 3: Welfarism 2 General social welfare function

General social welfare function 15

Figure 4.5 Distributive Justice Lecture 3: Welfarism 2 General social welfare function

Properties of a general SWF

16 Pareto principle –as before Inequality aversion For a given sum of utilities, social welfare increases by equalising redistribution An equalising transfer increases social welfare Equalising transfer: transferring one unit of utility for a person with higher to a person with lower utility (by means of transferring income) Mathematical property: symmetrical Also called Bergson-Samuelson social welfare function Distributive Justice Lecture 3: Welfarism 2 General social welfare function

Why B-S social welfare function?

17 Good question Was introduced as an instrument for describing all possible opinions of just distribution In general: not necessarily symmetrical But represents only all possible welfarist just distributions Arrows possibility theorem: A SWF cannot be the result of fair voting procedures for all possible preferences Does not imply that reaching a SWF is never possible Distributive Justice Lecture 3: Welfarism 2 Economics and utilitarianism

18 Diﬀerence between utilitarianism and economic welfare theory? 1. Utilitarianism is a philosophical system of ethics: individual and social Economic welfare theory analyses allocation of resources and distribution of income taking the moral and legal framework as given 2. possible inequality averse SWF Distributive Justice Lecture 3: Welfarism 2 Economics and utilitarianism

19 Common to both: Individual welfare (utility) as the ﬁnal, and only, good of society Hence the term: welfarism Distributive Justice Lecture 3: Welfarism 2 Economics and welfarism

Economics and welfarism

20 Normative economics: Optimal allocation (use) of resources Cost beneﬁt analysis Takes the framework of laws and ethical norms as given Based on the Pareto principle Identical preferences (The representative consumer) Distributional analysis: more of a problem