What is the general Welfare? Welfare Economic Perspectives on Equity

TL;DR

This paper explores how social welfare functions can be used to formalize different interpretations of equity, aiming to clarify debates and improve policy analysis despite ongoing disagreements.

Contribution

It emphasizes the importance of specifying diverse social welfare functions to better capture actual preferences for equity in economic analysis.

Findings

Formal social welfare functions can clarify equity concepts.

Heterogeneous preferences complicate welfare analysis.

Specifying preferences reduces verbal communication inconsistencies.

Abstract

Researchers do not know what the framers of the United States Constitution intended when they wrote of the general Welfare. Nevertheless, economists can conjecture by specifying social welfare functions that aim to express the preferences of the population. Economists have often simplified analysis of public policy by assuming that individuals have homogeneous, consequentialist, and self-centered preferences. In reality, individuals may hold heterogeneous private and distributional preferences. To enhance policy analysis, economists should specify social welfare functions that express the richness and variety of actual personal preferences. The possibilities are vast. I focus on preferences for equity. There has been much controversy regarding interpretation of equity, a term that public discourse has used in vague and conflicting ways. Specifying social welfare functions that formally express different interpretations of equity will not eliminate disagreements, but it should clarify concepts and reduce the inconsistencies that afflict verbal communication.