Studies in Choice and Welfare
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Studies in Choice and Welfare Editor-in-Chief M. Salles, France Series Editors P.K. Pattanaik, USA K. Suzumura, Japan Kotaro Suzumura Prasanta K. Pattanaik • Koichi Tadenuma Yongsheng Xu • Naoki Yoshihara Editors Rational Choice and Social Welfare Theory and Applications Essays in Honor of Kotaro Suzumura ABC Editors Professor Prasanta K. Pattanaik Professor Koichi Tadenuma Department of Economics Department of Economics University of California Hitotsubashi University Riverside 2-1 Naka, Kunitachi CA, 92521 Tokyo 186-8601 U.S.A Japan [email protected] [email protected] Professor Yongsheng Xu Professor Naoki Yoshihara Department of Economics Institute of Economic Research Andrew Young School of Policy Studies Hitotsubashi University Georgia State University 2-1 Naka, Kunitachi P.O. Box 3992 Tokyo 186-8603 Atlanta, GA 30302-3992 Japan U.S.A. [email protected] [email protected] ISBN 978-3-540-79831-6 ISBN 978-3-540-79832-3 (eBook) Studies in Choice and Welfare ISSN 1614-0311 Library of Congress Control Number: 2008931049 c Springer-Verlag Berlin Heidelberg 2008 This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer. Violations are liable to prosecution under the German Copyright Law. The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Cover design: WMX Design GmbH, Heidelberg Printed on acid-free paper 987654321 springer.com Preface This volume brings together papers, which were first presented at the International Conference on Rational Choice, Individual Rights and Non-Welfaristic Normative Economics, held in honour of Kotaro Suzumura at Hitotsubashi University, Tokyo, on 11–13 March 2006, and which have subsequently gone through the usual process of review by referees. We have been helped by many individuals and institutions in organizing the conference and putting this volume together. We are grateful to the authors of this volume for contributing their papers and to the referees who reviewed the papers. We gratefully acknowledge the very generous fundings by the Ministry of Education, Culture, Sports, Science and Technology, Japan, through the grant for the 21st Century Center of Excellence (COE) Program on the Normative Evaluation and Social Choice of Contemporary Economic Systems, and by the Japan Society for the Promotion of Science, through the grant for International Scientific Meetings in Japan, and the unstinted effort of the staff of the COE Program at Hitotsubashi University, without which the conference in 2006 would not have been possible. We thank Dr. Martina Bihn, the Editorial Director of Springer-Verlag for economics and business, for her advice and help. Finally, we would like to mention that it has been a great pleasure and privilege for us to edit this volume, which is intended to be a tribute to Kotaro Suzumura’s im- mense intellectual contributions, especially in the theory of rational choice, welfare economics, and the theory of social choice. Riverside Prasanta K. Pattanaik Tokyo Koichi Tadenuma Atlanta Yongsheng Xu Tokyo Naoki Yoshihara 2007 v Contents Introduction .................................................... 1 Part I Arrovian Social Choice Theory and its Developments Limited Rights as Partial Veto and Sen’s Impossibility Theorem ........ 11 Maurice Salles Harmless Homotopic Dictators .................................... 25 Nicholas Baigent Remarks on Population Ethics .................................... 35 Tomoichi Shinotsuka On Non-Welfarist Social Ordering Functions ........................ 43 Naoki Yoshihara Part II Social Choice and Fair Allocations Monotonicity and Solidarity Axioms in Economics and Game Theory ... 71 Yves Sprumont To Envy or to be Envied? Refinements of the Envy Test for the Compensation Problem .................................... 95 Marc Fleurbaey Choice-Consistent Resolutions of the Efficiency-Equity Trade-Off ...... 119 Koichi Tadenuma Characterization of the Maximin Choice Function in a Simple Dynamic Economy .............................................. 139 Koichi Suga and Daisuke Udagawa vii viii Contents Part III Rational Choice, Individual Welfare, and Games Suzumura Consistency ........................................... 159 Walter Bossert On the Microtheoretic Foundations of Cagan’s Demand for Money Function ............................................. 181 Rajat Deb, Kaushal Kishore, and Tae Kun Seo Hicksian Surplus Measures of Individual Welfare Change When There is Price and Income Uncertainty ........................ 195 Charles Blackorby, David Donaldson, and John A. Weymark Beyond Normal Form Invariance: First Mover Advantage in Two-Stage Games with or without Predictable Cheap Talk ...................... 215 Peter J. Hammond Part IV Social Welfare and the Measurement of Unemployment and Diversity Unemployment and Vulnerability: A Class of Distribution Sensitive Measures, its Axiomatic Properties, and Applications ................. 237 Kaushik Basu and Patrick Nolen Ordinal Distance, Dominance, and the Measurement of Diversity ....... 259 Prasanta K. Pattanaik and Yongsheng Xu Contributors Nicholas Baigent Institute of Public Economics, Graz University, A-8010 Graz, Austria [email protected] Kaushik Basu Department of Economics, Cornell University, Ithaca NY 14853, USA [email protected] Charles Blackorby Department of Economics, University of Warwick, Coventry, CV4 7AL, UK [email protected] Walter Bossert Department of Economics, University of Montreal,´ Montreal, Canada [email protected] Rajat Deb Department of Economics, Southern Methodist University, Dallas, TX 75275, USA [email protected] David Donaldson Department of Economics, University of British Columbia, Vancouver, B.C, V6T 1Z1, Canada [email protected] Marc Fleurbaey CERSES-University Paris 5, 45 rue des Sts Peres, 75270 Paris Cedex, France marc.fl[email protected] Peter J. Hammond Department of Economics, University of Warwick, Coventry, CV4 7AL, UK [email protected] ix x Contributors Kaushal Kishore Department of Economics, Southern Methodist University, Dallas, TX 75275 USA Patrick Nolen Department of Economics, University of Essex, Colchester CO4 3SQ, Essex, UK [email protected] Prasanta K. Pattanaik Department of Economics, University of California, Riverside, CA 92521, USA [email protected] Maurice Salles CREM, Universite´ de Caen, 14032 Caen cedex, France [email protected] Tae Kun Seo Department of Economics, Southern Methodist University, Dallas, TX 75275, USA Tomoichi Shinotsuka Graduate School of Humanities and Social Sciences, University of Tsukuba, Japan [email protected] Yves Sprumont Departement´ de Sciences, Economiques´ and CIREQ, Universite´ de Montreal,´ Montreal,´ Canada [email protected] Koichi Suga School of Political Science and Economics, Waseda University, Shinjuku-ku, Tokyo 169-8050, Japan [email protected] Koichi Tadenuma Department of Economics, Hitotsubashi University, Kunitachi, Tokyo 186-8601, Japan [email protected] Daisuke Udagawa Graduate School of Economics, Waseda University, Shinjuku-ku, Tokyo 169-8050, Japan udagawa [email protected] John A. Weymark Department of Economics, Vanderbilt University, VU Station B #35189, Nashville, TN 37235-1819, USA [email protected] Contributors xi Yongsheng Xu Department of Economics, Georgia State University, Atlanta, GA 30303, USA [email protected] Naoki Yoshihara Institute of Economic Research, Hitotsubashi University, Kunitachi, Tokyo 186-8603, Japan [email protected] Introduction Kotaro Suzumura received his doctoral degree in economics from Hitotsubashi University in 1980. He has taught at various institutions, including Hitotsubashi University (1971–1973, 1982–2008), Kyoto University (1973–1982), London School of Economics (1974–1976), Stanford University (1979–1980), University of Pennsylvania (1987), University of Essex (1990–1991), and University of British Columbia (1994). He has been a British Council Visiting Scholar at Cambridge University (1973–1974), a Visiting Fellow at Australian National University (1986) and at All Souls College, Oxford University (1988), a Fulbright Senior Research Fellow at Harvard University (1993), a Nissan Visiting Fellow at St. Antony’s College, Oxford University (1996), and a Visiting Fellow Commoner at Trinity College, Cambridge University (2001). Though Kotaro is well-known mainly as the author of many seminal contribu- tions to social choice theory, welfare economics, and theoretical industrial organi- zation, he started his academic career by working in the fields of economic growth theory, general equilibrium in linear multisector models, and international trade. His papers in these fields were published in Economic Studies Quarterly (Japanese Economic Review) and Metroeconomica. After completing his doctoral course work, Kotaro earnestly began to work on the theory of rational choice, social choice, and welfare economics.