Interdependent Utility Functions Research Articles

Existence of a Walrasian Equilibrium in Locally Convex Topological Vector Spaces, with Interdependent Utility Functions

In this paper we extend the well known result of existence of Walrasian equilibrium given in Debreu (1952) to economies modeled over topological vector spaces. Our work is closely related to the previous results of Yannelis-Pranhakar (1983), and Tan and Yuan (1999), but unlike these papers we prove the existence of a Walrasian equilibrium in infinite dimensional economies with interdependent and price-dependent utilities.

Situating care in mainstream health economics: an ethical dilemma?

Abstract:Standard health economics concentrates on the provision of care by medical professionals. Yet ‘care’ receives scant analysis; it is portrayed as a spillover effect or externality in the form of interdependent utility functions. In this context care can only be conceived as either acts of altruism or as social capital. Both conceptions are subject to considerable problems stemming from mainstream health economics’ reliance on a reductionist social model built around instrumental rationality and consequentialism. Subsequently, this implies a disregard for moral rules and duties and the compassionate aspects of behaviour. Care as an externality is a second-order concern relative to self-interested utility maximization, and is therefore crowded out by the parameters of the standard model. We outline an alternative relational approach to conceptualising care based on the social embeddedness of the individual that emphasises the ethical properties of care. The deontological dimension of care suggests that standard health economics is likely to undervalue the importance of care and caring in medicine.

Situating Care in Mainstream Health Economics: An Ethical Dilemma?

Standard health economics concentrates on the provision of care by medical professionals. Yet ‘care’ receives scant analysis; it is portrayed as a spillover effect or externality in the form of interdependent utility functions. In this context care can only be conceived as either acts of altruism or as social capital. Both conceptions are subject to considerable problems stemming from mainstream health economics’ reliance on a reductionist social model built around instrumental rationality and consequentialism. Subsequently, this implies a disregard for moral rules and duties and the compassionate aspects of behaviour. Care as an externality is a second-order concern relative to self-interested utility maximization, and is therefore crowded out by the parameters of the standard model. We outline an alternative relational approach to conceptualising care based on the social embeddedness of the individual that emphasises the ethical properties of care. The deontological dimension of care suggests that standard health economics is likely to undervalue the importance of care and caring in medicine.

Regular Distributive Efficiency and the Distributive Liberal Social Contract

AbstractWe consider abstract social systems of private property, made of n individuals endowed with nonpaternalistic interdependent preferences, who interact through exchanges on competitive markets and Pareto‐improving lump‐sum transfers. The transfers follow from a distributive liberal social contract defined as a redistribution of initial endowments such that the resulting market equilibrium allocation is both: (i) a distributive optimum (i.e., is Pareto‐efficient relative to individual interdependent preferences) and (ii) unanimously weakly preferred to the initial market equilibrium. We elicit minimal conditions for meaningful social contract redistribution in this setup, namely, the weighted sums of individual interdependent utility functions, built from arbitrary positive weights, have suitable properties of nonsatiation and inequality aversion; individuals have diverging views on redistribution, in some suitable sense, at (inclusive) distributive optima; and the initial market equilibrium is not a distributive optimum. We show that the relative interior of the set of social contract allocations is then a simply connected smooth manifold of dimension n − 1. We also show that the distributive liberal social contract rules out transfer paradoxes in Arrow–Debreu social systems. We show, finally, that the liberal social contract yields a norm of collective action for the optimal provision of any pure public good.

The determinants of purposeful voluntarism

Voluntarism is pervasive among humans, but what factors explain this particular nonmarket activity? Does it result from altruistic motives to help those less fortunate? Is it the result of rational or instinctive behavior that enhances individual and group survival? In this paper we draw upon the works of Adam Smith, Gary Becker, Herbert Simon, and evolutionary biologists Matt Ridley and Richard Dawkins to construct a formal model of interdependent utility functions. We test the implications of our model with data on volunteerism for U.S. states. Our findings support theories of volunteerism based on mutual aid among people with a common race and language and a relatively even distribution of income.

The poverty of growth with interdependent utility functions

We argue that with interdependent utility functions growth can lead to a decline in total welfare of a society if the gains from growth are sufficiently unequally distributed in the presence of negative externalities in consumption, i.e. envy.

The Individual in Mainstream Health Economics: A Case of Persona Non-grata

This paper is motivated by Davis' [14] theory of the individual in economics. Davis' analysis is applied to health economics, where the individual is conceived as a utility maximiser, although capable of regarding others' welfare through interdependent utility functions. Nonetheless, this provides a restrictive and flawed account, engendering a narrow and abstract conception of care grounded in Paretian value and Cartesian analytical frames. Instead, a richer account of the socially embedded individual is advocated, which employs collective intentionality analysis. This provides a sound foundation for research into an approach to health policy that promotes health as a basic human right.

The Poverty of Growth with Interdependent Utility Functions

We argue that with interdependent utility functions growth can lead to a decline in total welfare of a society if the gains from growth are sufficiently unequally distributed in the presence of negative externalities, i.e., envy.

Social Capital Formation in Large-Scale Development Projects

ABSTRACT Project design, implementation and evaluation are undergoing major change in line with new concepts and practices of community participation, consultation and stakeholder analysis. Social capital is the key in this change process. This paper surveys recent literature on social capital and derives guidelines for development projects, especially large-scale projects. The paper offers a micro-economic method for measuring social capital derived from interdependent utility functions.

The impact of caring on exchange choices and efficiencies: a modification of Boulding’s three social organizers

In this article, a system is developed for modeling traditional exchanges and those based, wholly or in part, on threats or interdependent utility functions (i.e., caring). This structure is used to analyze 1) the impact of interpersonal and intergroup perceptions on exchange choice and efficiency; 2) factors influencing firm decisions to accede to or resist coerced exchanges; and 3) conditions under which exchanges involving involuntary parties are rational. It is argued that, in addition to impacts on psychic returns, caring impacts on exchange efficiency through its effects on the quantity of information, due to attraction or aversion, and the quality of information processing, due to bias. Malevolence is never conducive to efficient exchange, but high levels of benevolence may also be detrimental. It also is shown that the economics of coerced exchanges bear strong similarities to analyses regarding price discrimination and using free samples for marketing. Firms are most likely to resist coerced exchanges if their marginal costs are rapidly rising or if acceding to the coerced exchange would reduce market demand. Possible trends in the importance of caring in exchange are also discussed.

Systems of Benevolent Utility Functions

This paper studies systems of utility functions in which each person's utility depends on his or her own consumption as well as on the utilities of others. We consider the question of when a system of interdependent utility functions induces unique utility functions over allocations and identifies the class of transformations on interdependent utility functions that are equivalent in the sense of inducing the same preferences over allocations. We show that well‐behaved systems of this kind can be studied by means of the theory of dominant‐diagonal matrices and that the theory of dominant‐diagonal matrices with finitely many elements extends in a satisfactory way to denumerable matrices. The theory of denumerable dominant diagonal matrices allows an elegant analysis of systems of intergenerational benevolence. We also revisit and extend the theory of two‐sided altruism as formulated by Kimball and by Hori and Kanaya.

Inequality within and among nations

This paper looks at both within and among country inequality utilizing data for the 82 countries for which comparable data are available from the 1996 World Development Report. In the spirit of Dalton (1920) and Atkinson (1970), this paper reports estimates of the welfare loss arising from inequality. The paper also explores the implications of Duesenberry style interdependent utility functions and evaluates the appropriateness of the Gini coefficient as a possible measure of “relative deprivation”. In 18% of the pairwise comparisons of inequality in different countries, the situation is ambiguous in the sense that neither country Lorenz dominates the other (Shorrocks, 1982). Generalized Lorenz curves leave ambiguous 16% of paired welfare comparisons. The data generated a surprisingly stable empirical result: for any utility function satisfying Dalton's Principle of Proportionality of Transfers, the loss of welfare rising from within country inequality is approximately 40% of the loss caused by inequality among nations.

Identification and Economic Behavior Sympathy and Empathy in Historical Perspective

In modern economics, the use of sympathy and empathy shows significant ambiguity. Sympathy has been used in two different senses. First, it refers to cases where the concern for others directly affects an individual's own welfare (Sen, 1977). Second, the term has served the purposes of welfare economics, where it is associated with interpersonal comparisons of the extended sympathy type, that is, comparisons between one's own situation in a social state and someone else's in a different social state (Arrow, 1963 [1951]). On the other hand, empathy has been used interchangeably with sympathy either to render the idea of interdependent utility functions (Leibenstein, 1976), or to convey the imaginative process of imagining oneself in someone else's place (Harsanyi, 1977).

Eternal Challenge of Islamic Economics to Capitalism and Communism

Capitalism is fundamentally an economics of producers that has always served the cause of producers. Its special concern for economizing the production process in the guise of economic efficiency went always in favor of producers at the cost of interests of workers and consumers thereby creating a strong sense of economic deprivation in the conscience of workers and low‐income consumers who generally constitute the majority of the population in almost all the developed countries including the United States of America. It is this growing sense of economic deprivation that can be easily observed, especially in the big cities of the United States of America, as a catalyst for Marxist reaction. The Marxist fruit of Capitalist international economics appeared in the form of cold war within the global economy between the rich and the poor countries. Keeping in view the historical dynamics of Marxist movement, twentieth century Capitalist economists have consciously started to counter the threat of Marxism by incorporating in economics the extensive analysis of issues such as social welfare function, interdependent utility functions, intertemporal utility functions, equity in distribution, unemployment insurance, economic development, labor unionism, full‐employment of labor, economic rents, consumer protectionism etc. in the form of labor economics, public sector economics and development economics. It was no doubt a Capitalists' cleverish attempt to redress the grievances, mainly resulting from market failures, of the economically depressed classes within the Capitalist system. So far problems of the depressed classes could not be solved and are not at all expected to be fully solved within the original Capitalistic framework due to its inherent exploitative tendencies.

Interdependent utility and cooperative behavior

In this paper we broaden current models of interdependent utility functions, develop a more general and inclusive model of interdependency, and demonstrate the specific nature of the Pareto improvement achievable through cooperative behavior of all individuals with different tastes who adopt similar (or identical) consumption baskets. The resulting model helps to explain such diverse phenomena as the declining importance of the family unit as well as the trend toward a more diverse consumption pattern among communal groups such as the Israeli kibbutz.

Empirical analysis of motives underlying individual contributions to charity

The direct benefits motive underlying charitable contributions has been extensively used as the dominant assumption in charity literature. Indded, it is theoretically simpler to assume independent rather than interdependent utility functions. This study does not justify exclusive assumption of direct benefits motive in theoretical or empirical analysis. Both indirect benefits and Kantian motives are implied by this study. While a clear cut dominance of one motive is not indicated in these results (and not surprising due to the cross-section, aggregate state data used), there is little or no support for the direct benefits motive. The existence of indirect and Kantian motives are indicated by the data. Future research into charitable behavior should take note of these findings, either to develop methodologies able to unambiguously discuss the motives, or to incorporate and provide more than simple acknowledgement of indirect benefits and Kantian motives.