Economic Theory (forthcoming)

Authors
Philippe Mongin
Last affiliation: Centre National de la Recherche Scientifique
Abstract
We investigate the conflict between the ex ante and ex post criteria of social welfare in a new framework of individual and social decisions, which distinguishes between two sources of uncertainty, here interpreted as an objective and a subjective source respectively. This framework makes it possible to endow the individuals and society not only with ex ante and ex post preferences, as is usually done, but also with interim preferences of two kinds, and correspondingly, to introduce interim forms of the Pareto principle. After characterizing the ex ante and ex post criteria, we present a first solution to their conflict that extends the former as much possible in the direction of the latter. Then, we present a second solution, which goes in the opposite direction, and is also maximally assertive. Both solutions translate the assumed Pareto conditions into weighted additive utility representations, and both attribute to the individuals common probability values on the objective source of uncertainty, and different probability values on the subjective source. We discuss these solutions in terms of two conceptual arguments, i.e., the by now classic spurious unanimity argument and a novel informational argument labelled complementary ignorance. The paper complies with the standard economic methodology of basing probability and utility representations on preference axioms, but for the sake of completeness, also considers a construal of objective uncertainty based on the assumption of an exogeneously given probability measure. JEL classification: D70; D81.
Keywords ex ante and ex post social welfare  objective versus subjective uncertainty  Pareto principle  separability  Harsanyi social aggregation theorem  spurious unanimity  complementary ignorance   objective versus subjective probability
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References found in this work BETA

The Foundations of Statistics.Leonard J. Savage - 1954 - Wiley Publications in Statistics.
The Foundations of Statistics.Leonard J. Savage - 1956 - Philosophy of Science 23 (2):166-166.
Spurious Unanimity and the Pareto Principle.Philippe Mongin - 2016 - Economics and Philosophy 32 (3):511-532.

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Citations of this work BETA

Bayesian Decision Theory and Stochastic Independence.Philippe Mongin - 2020 - Philosophy of Science 87 (1):152-178.
Economics and Economic Justice.Marc Fleurbaey - 2008 - Stanford Encyclopedia of Philosophy.
Fully Bayesian Aggregation.Franz Dietrich - forthcoming - Journal of Economic Theory.

View all 6 citations / Add more citations

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