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Three essays on the criteria to be used in welfare economics

University of British Columbia

This dissertation consists of three essays devoted to the general problem of combining various criteria for evaluating the collective desirability of social states. The first essay discusses the problem of combining a quasi-ordering of some set of alternatives (interpreted as a criterion for an increase in actual social welfare) with an extension of this quasi-ordering to the power set of this set (interpreted as a criterion for an increase in potential social welfare) to obtain a quasi-ordering of some subset of the Cartesian product of this set and its power set lexicographically based on the criterion for an increase in actual welfare. The main result of this essay is that, in order for such a quasi-ordering to exist, it is necessary and sufficient that the subset to which it is applied is such that the extension subsumes the original criterion. When applied to the standard Pareto quasi-ordering and its extension defined by the Chipman-Moore (1971) - Samuelson (1950) quasi-ordering, and under standard assumptions on the economic domain, this result is shown to imply Gorman’s (1955) conjecture for the transitivity of the Compensation criterion a la Kaldor-Hicks-Scitovsky. The second essay examines Sen's (1991) suggestion that preference information be used to supplement the criterion of freedom of choice for ranking opportunity sets. This paper shows, with some generality, that, in order for this supplementation to produce a transitive ranking of the opportunity sets, it is necessary and sufficient to assume that the domain ranked is such that the individual preference ordering encompasses the criterion of freedom of choice. However, it is also shown that the quasi-transitivity of such a ranking can be obtained without further assumption. The lesson of this paper is thus that there is little room for constructing a ranking of opportunity sets that attaches value to their freedom of choice while giving some weight to individual preferences. If freedom of choice is to have any value in the ranking, then in order for the ranking to be transitive, this value will have to be instrumental rather than intrinsic (using Sen's (1988) terminology). Finally, the third essay tries to make sense of the notion of exploitation set forth by Marxists and others and to relate it to that of bargaining power. For this task, a definition of exploitation is proposed which, it is contended, captures the intuitive meaning of the word as the act of taking unfair advantage of someone. More precisely, the definition considers a relationship between two agents to be exploitative if one agent (the exploiter) obtains an advantage from this relationship which can be shown to depend upon the initial deprivation of the other (the exploited) with respect to some poverty threshold. To assess whether the advantage of the exploiter is indeed due to the deprivation of the exploited, the definition considers a counterfactual experiment in which the state of deprivation of the exploited is eliminated and examines the welfare consequences of this experiment for the presumed exploiter. If the latter becomes worse off from this elimination of the other's deprivation, then it is asserted that the presumed exploiter is indeed taking an advantage of the other’s deprivation. The problem of specifying an "adequate" poverty threshold is also examined by appealing to bargaining theory. This examination is based upon the somewhat intuitive idea that exploitation is related to an "excessive" bargaining power on the part of the exploiter. The definition of the poverty threshold should therefore be made in such a way as to make exploitation a good measure of the bargaining power of the exploiter in the bargaining game representation of the relation between the exploited and the exploiter.

Thesis/Dissertation

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2008-09-15

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http://hdl.handle.net/2429/2012

Economics

University of British Columbia

UBCV

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