## Welfare Economics and Social Choice Theory (Google eBook)Welfare economics, and social choice theory, are disciplines that blend economics, ethics, political science, and mathematics. Welfare Economics and Social Choice Theory, 2nd Edition, include models of economic exchange and production, uncertainty, optimality, public goods, social improvement criteria, life and death choices, majority voting, Arrow’s theorem, and theories of implementation and mechanism design. Our goal is to make value judgments about economic and political mechanisms: For instance, does the competitive market produce distributions of products and services that are good or bad for society? Does majority voting produce good or bad outcomes? How can we design tax mechanisms that result in efficient amounts of public goods being produced? We have attempted, in this book, to minimize mathematical obstacles, and to make this field accessible to undergraduate and graduate students and the interested non-expert. |

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### Contents

2 | |

8 | |

BARTER EXCHANGE | 33 |

WELFARE PROPERTIES OF MARKET EXCHANGE 51 | 50 |

WELFARE PROPERTIES OF JUNGLE EXCHANGE | 79 |

ECONOMIES WITH PRODUCTION | 93 |

UNCERTAINTY IN EXCHANGE 119 | 118 |

12 | 141 |

LIFE AND DEATH CHOICES | 229 |

Economic Model The Money Value of a Life | 230 |

A Formal Version of the Economic Model | 231 |

The Broome Paradox | 234 |

ExAnte and ExPost | 235 |

Problems With Utilitarian Mesures of Life Death Choices | 238 |

The Pareto Principle and Extended Pareto Principles | 243 |

Whats Repugnant About the Repugnant Conclusion? | 246 |

EXTERNALITIES | 143 |

PUBLIC GOODS | 161 |

COMPENSATION CRITERIA 195 | 194 |

The Samuelson Criterion | 202 |

Compensation Criteria in Exchange Economies | 204 |

Consumers Surplus Money Metrics | 206 |

Consumers Surplus Boadway Paradox | 208 |

Quasilinear Utility | 210 |

Cost Beneﬁt Analysis With One Good | 213 |

Exercises | 214 |

Selected References | 215 |

FAIRNESS AND THE RAWLS CRITERION | 217 |

Fairness | 218 |

The Rawls Criterion | 221 |

Exercises | 225 |

Selected References | 226 |

Conclusions About Life and Death Choices | 247 |

Exercises | 248 |

MAJORITY VOTING 253 | 252 |

The Majority Voting Criterion | 254 |

Majority Voting and SinglePeakedness | 256 |

The Multidimensional Case | 263 |

Multidimensional Voting Are the Cycles That Bad? | 268 |

Exercises | 270 |

ARROWS IMPOSSIBILITY THEOREM | 275 |

CCJlO3lDi | 321 |

BAYESIAN IMPLEMENTATION 345 | 344 |

EPILOGUE | 363 |

SOLUTIONS TO EXERCISES 371 | 370 |

399 | |

### Common terms and phrases

acyclic agent Arrow social welfare assume assumption Bayesian budget constraint budget line bundle Central Authority Chapter choose competitive equilibrium complete and transitive consider contingent commodities core decision deﬁned deﬁnition Edgeworth box equal ex-ante ex-post example exchange economy expected utility ﬁgure ﬁnance ﬁnd ﬁrm ﬁrst ﬁve ﬁxed Gibbard-Satterthwaite Theorem given Groves-Ledyard incentive compatibility indifference curves individuals input interim interim efficient Kaldor level of output Lindahl equilibrium lotteries majority voting marginal utility Maskin monotonicity modiﬁed Nash equilibrium outcome Pareto criterion Pareto optimal allocation person i’s preference proﬁle problem production plan production set production vector proﬁt proof Public Good Board quantity quasi-transitive result rule Samuelson Samuelson condition satisﬁes SCF F SCF’s Second Fundamental Theorem single-peakedness social choice social preference relation social welfare function Suppose tax scheme tax shares Theorem of Welfare theory tion traders unit utility function utility levels voting paradox wants to maximize welfare economics