Social Utility Function Research Articles

Changes in Social Welfare in an Intertemporal Economy

General Equilibrium Theory (GE) scrutinizes the ability of markets to achieve efficient allocation of resources. Our main purpose is, in the framework to the GE to analyze, the possibility of design a mechanism enabling agents to make independent decisions compatible with social welfare. More precisely, we address the problem of the possibility of decentralization mechanism to sustain efficiency and social welfare at the same time. Specifically, introducing a social utility function, we argue on the possibility of improving the social welfare transferring resources between periods of the economy. This mechanism introduces a Rawlsian solution improving the welfare of the individuals worst positioned.

Measurement of the social loss of wrong public budget allocation

PurposeThe purpose of this paper is to measure the social loss occurring due to the inability of the government to use the real public demand function.Design/methodology/approachThe authors developed a model that enables maximization of the public utility of a given public budget by maximizing total consumer surplus, and presented a method for calculating the social loss due to the inability to use the real public demand function.FindingsThe social loss occurring due to the inability of the government to use the real public demand curve was shown.Research limitations/implicationsIn reality, it is impossible to get the proper evaluation of social utility function. Instead, the authors assumed a given public demand for each public good.Practical implicationsThe paper presents a way to measure overtime social loss as a function of the sum of overtime government expenses, the coefficient of variation of the public good supply and the elasticity of demand of the average demand curve.Social implicationsImproving the allocation of public budget.Originality/valueGiven the demand curve for each public good, this paper presents a technique for the optimal allocation of a given budget in order to maximize aggregate consumer surplus.

A quantitative model of regulator’s preference factor (RPF) in electricity–environment coordinated regulation system

Abstract This paper explores quantification of regulator’s preference factor (RPF) in electricity–environment coordinated regulation system. Based on social welfare economics, we articulately depict RPF’s qualitative concept and its economic meaning. Then, applying abstract functions (i.e., abstract social welfare function, abstract utility function, and abstract production function), we deduce the partial-social-welfare elasticity, and build the mathematics model of maximizing social welfare. We nest this elasticity into the model’s Kuhn–Tucker conditions, and obtain RPF’s definition formula. By solving the Kuhn–Tucker conditions, we get RPF’s quantitative formula, which solves the problem of hard to quantify regulator’s preference in electricity–environment coordinated regulation system. The result shows that RPF only has relationship to subsystems’ production function, and is independent of social welfare function and subsystems’ utility function. Finally, we provide an empirical research based on the western region of China from year 1995 to 2004. It reveals that regulator has relative stability preference to mitigating pollutants. And validity test confirms that the empirical result is fit well to the practice. The RPF is truly a more general and valid instrument to measure regulator’s preference in its regulated field.

Social norms or social preferences?

Some behavioral economists argue that the honoring of social norms can be adequately modeled as the optimization of social utility functions in which the welfare of others appears as an explicit argument. This paper suggests that the large experimental claims made for social utility functions are premature at best, and that social norms are better studied as equilibrium selection devices that evolved for use in games that are seldom studied in economics laboratories.

Social preferences and Environmental Kuznets Curve in climate change integrated assessment modelling

The Environmental Kuznets Curve (EKC) hypothesis implies that a bell shaped relationship between income and pollution would induce policy makers to pursue economic growth in order to improve environment. In this paper we will use the popular integrated assessment model DICE for climate change in order to consider a more generalised version of the social planner utility function and we will investigate the relationship between income and pollution for different values of the elasticity of the marginal utility of consumption (α). Results do not provide evidence in favour of the Environmental Kuznets Curve existence for CO2 emissions in the optimal path but EKC decomposition factors are affected by variations of the α parameter.

From Keynes to Solow to optimal growth: An encompassing model of monetary and fiscal policy

A dynamic, out-of-equilibrium model of aggregate demand and supply is specified. The existence of, and convergence to, a macroeconomic equilibrium is derived, and the existence of a supporting revealed social utility function is established. Empirical estimates for three recent historical ‘eras’ suggest the model's explanatory power is impressive. Implications for possible policy repercussions include striking shifts in effect.

A preference foundation for Fehr and Schmidt’s model of inequity aversion

Fehr and Schmidt (FS) introduced an influential social utility function for individuals in interpersonal contexts that captures self-centered inequity aversion. The value of this social utility function lies in its exceptionally good balance between parsimony and fit. This paper provides a preference foundation for exactly the model of FS with preference conditions that exactly capture the exceptionally good balance of FS. Remarkably, FS is a special case of Schmeidler's rank-dependent utility for decision under uncertainty.

A Theory of Status-Mediated Inequity Aversion

We introduce a new social utility function which relates inequity aversion to social status, effort, and ability. The basic idea is as follows: Actors do not suffer from inequality but from inequity relative to a fair share that reflects some normative orientation the actors have internalized. In this regard we advocate the rule of proportionality which states that rewards should be proportional to some standard of comparison. We apply this social utility function to various games from non-cooperative and cooperative game theory and interpret the results with respect to the effects of social status on behavioral outcomes.

Do Social Preferences Matter in Competitive Markets?

Experimental evidence stresses the importance of so-called social preferences for understanding economic behavior. Social preferences are defined over the entire allocation in a given economic environment, and not just over one's own consumption as is traditionally presumed. We study the implications for competitive market outcomes if agents have such preferences. First, we clarify under what conditions an agent behaves as if she was selfish - i.e. when her demand function is independent of others' behavior. An agent behaves as if selfish if and only if her preferences can be represented by a utility function that is separable between her own utility and the allocation of goods for all other agents. Next, we study equilibrium outcomes in economies where individual agents behave as if selfish. We how that one can identify a corresponding ego-economy such that the equilibria of the ego-economy coincide with the equilibria of the original economy. As a consequence, competitive equilibria exist and they are material efficient. In general, however, the First Welfare Theorem fails. We introduce the class of Bergsonian social utility functions, which are social utility functions that are completely separable in all agents' material utility. For such social preferences, the Second Welfare Theorem holds under a suitable growth condition. We also establish that in uncertain environments, agents with social preferences typically do not behave as if selfish. Furthermore, in the presence of public goods, both demand and equilibrium outcomes depend on social preferences.

An analytical framework for aggregating multiattribute utility functions

This paper proposes a procedure for aggregating individual cardinal utility functions into a social utility function that represents the preferences of all the individuals as a whole. The procedure is non-interactive and is based upon the determination of the utility consensus values. This is accomplished by minimizing a distance function model that is transformed into an Archimedean goal programming problem. The procedure is applied to a general group multilinear utility function.

A Method for Eliciting Utilities and its Application to Collective Choice

Designing a mechanism that provides a direct incentive for an individual to report her utility function over several alternatives is a difficult task. A framework for such mechanism design is the following: an individual (a decision maker) is faced with an optimization problem (e.g., maximization of expected utility), and a mechanism designer observes the decision maker’s action. The mechanism does reveal the individual’s utility truthfully if the mechanism designer, having observed the decision maker’s action, infers the decision maker’s utilities over several alternatives. This paper studies an example of such a mechanism and discusses its application to the problem of optimal social choice. Under certain simplifying assumptions about individuals’ utility functions and about how voters choose their voting strategies, this mechanism selects the alternative that maximizes Harsanyi’s social utility function and is Pareto-efficient.

Optimal Utilization and Sustainable Development of Common Property Resources Through Private-Public Participation: Reference To Rural India

Common Property Resources (CPRs) are now considered as employment-income generating social assets, a meager alternative to agriculture for the poorer sections in rural economies of developing countrie. It is allso felt that a sustainable development of these resouces is necessary for maintaining ecological balance and minimizing environmental hazards. A contradictory implication is marked when objectives of CPRs development are compared. On the one hand, CPRs as major part of natural resources are to be developed and preserved for ecological balance. On the other, so me part of CPRs are to be exploited and utilized for employment-income generation for the rural poor as well as for social consumption. Both are included in social utility function. In order to solve the abov e contradiction, we conceivc a process of optimal utilization of CPRs, which Can ensure CPRs' sustainable development. This need some special types of management procedure and management organization in which both public and private cooperation is necessary. In this paper, an attempt is made to provide a suggestive model for managing CPRs by properly addressing the above issues. We suggest for the formation of a three-tier CPRs management organiZiltion in which public and private parties can participate actively in decision making towards CPRs' growth, preservation and consumption. The village level managment unit is called as Village Common Resource Management Organization (VCRMO). The procedural and funtional aspects of CPRs management at village level are s uggested by considering the prevailing social , economic and political environments in Indian villages. The functional aspects of CPRs management mainly cover the matters of planning for development of both waste/semi-waste CPRs lands and productive CPRs lands; and the matters of operation, direction and coordination in order to implement the plans by addressing the grass-root issues, such as people accessibility to CPRs, local and community demands, negative externalities, and so on. For an effective management of CPRs, it would require a proper valuation of CPRs and detemlination of optimal limits of exploitation of CPRs for consumption and production, and determination of the periodical investment requirements for CPRs' Sustainable development. In separate sections, the above matters are discussed and alternative methods are sugges ted for the above exercises on the basis of our grass-root experiences.

Social Utility Functions—Part I: Theory

The dominant approaches to utility-based multiagent decision theory rely on the premise of individual rationality-the doctrine that each individual is committed to achieving the best outcome for itself, regardless of the effect doing so has on others. This fundamentally asocial concept is the basis of conventional von Neumann-Morgenstern (vN-M) utilities but is inadequate to characterize truly cooperative artificial systems. Social utility functions differ from conventional vN-M utilities in that they are functions of multiple decision-maker preferences, rather than actions, and thus permit individuals to expand their spheres of interest beyond the self. A logical basis for coherent reasoning in multiagent environments must obey exactly the same desiderata as do multivariate probability functions. By taking a dual utilities approach (one to account for effectiveness and one to account for efficiency), a new game-theoretic structure, called satisficing games, provides a decision-making procedure that accounts for both individual and group interest and presents a framework for the design of sophisticated multiagent societies.

Rawlsian maximin, Dutch books, and non-additive expected utility

The utilitarian and Rawlsian principles for choosing between income distributions in society are usually considered as alternatives and to some degree opposite approaches to the problem of social ranking. However, if the utilitarian principle is considered in the broader perspective of non-additive probabilities, contradictions disappear and the Rawlsian maximin principle appears as a special case of generalized expected utility maximization. In this paper we consider a set of axioms for a preference relation defined on a set of n-vectors, describing the distribution of welfare among a population of n individuals, which gives a utility representation as expected utility with respect to a suitable non-additive measure as in the rank-dependent utility models. The specific approach taken in the present paper consists in (1) relating the notion of Dutch books, which has proved useful in other applications, to the problem of ranking income distribution, and (2) using ordinal invariance to obtain a characterization in the form of a so-called k-Rawlsian social utility function, which reduces to the standard Rawlsian function by way of the Gärdenfors principle.

Sensitivity of optimal paths with respect to horizon length in a nonstationary multisector growth model

In the paper we present some results on convergence properties of optimal programs of growth in a multisector growth model context. There is no need for convexity or monotonicity of production mappings though we impose continuity in product topology on intertemporal social utility function. We show that if final stock is sustainable then sensitivity and continuity of optimal growth paths hold - both in investment and consumption. We apply our results to a simple multisector Leontief growth model with consumption and discounted utility. (original abstract)

Sanyi's Social Aggregation Theorem and Dictatorship

In this paper I investigate the possibility of a dictatorship in the context of Harsanyi's Social Aggregation Theorem. Preliminarily, some propositions about Harsanyi's Theorem are presented using an alternative principle that I name Quasi-strong Pareto, which is the latter part of Strong Pareto. Then I define dictatorship as a requirement that social preference agrees with a dictator's preference or those of members of dictatorial group even if their preferences strictly contradict those of all other people in the society. Conclusively, although in each version of Harsanyi's Theorem with Pareto Indifference, Weak Preference Pareto or Weak Pareto the social utility function may have a form of dictatorship, however if individuals' vNM utility functions are all 'individualistic' and Quasi-strong Pareto is satisfied, then the dictatorship is excluded.

Federalization of Local Criminal Procedures: a Study of Conflict in Values and Process

This article is an investigation into why the U.S. federal courts have failed to effectively control local police conduct by means of constitutional rules. In so doing, the article finds that the federal courts' approach to the control of police abuse of power—federalization and constiotutionalization of criminal procedures—is ill informed of the nature and essence of police work within the community context and at the grassroots level. Particularly, it fails to take into account the structural and normative forces giving rise to police abuse. The central thesis of this paper is that the federal courts' constitutional supervision of local police conduct is at odd with the police's operational reality and functional requirements, as reflecting entrenched local customs, shifting community expectations and contingent situational circumstances. The courts' right-based approach is in sharp contrast with the police's utilitarian method. At a more structural level, traditionally and by design, the court is made to stand aloof from the people. The police is required to stay in touch with the people. One of the main purpose of this paper is thus to illuminate the differences in decision-making process and clarify observable disparity in constitutional value preferences between the federal courts and the local police. This will be discussed in the context of police civil liability under Title 42, United States Code, Section 1983 of the Civil Rights Act. The article concludes in observing that the federal courts and the local police, though housed under the same criminal justice system, are two distinctive social control institutions, each with its own political legitimacy base and social utility functions. They share different values, orientation, allegiance and thinking process. These differences, more so than other behavioral or organization factors, accounted for much of the observed police misconduct to date.

An Overlapping-Generations Model of International Trade with a Durable Consumption Good

We construct a simple overlapping-generations model of international trade with a durable consumption good. We show that the dynamics of the market is described by a nonlinear second-order difference equation; there exists a unique autarkic stationary equilibrium; and it is locally conditionally stable. Further we show that there exists a homothetic fictitious social utility function that characterizes the stationary equilibrium as a “tangent point” of an indifference curve and the production possibility frontier. With this, even in the presence of the consumption durability, we can easily show the basic predictions on trade patterns due to some well-known static trade models such as the Heckscher-Ohlin-Samuelson model and the specific-factors model remain valid at the stationary equilibrium. In addition, we show that a country with a higher rate of time preference tends to have the comparative advantage on the durable good.

An experimental test of a game-theoretical model of reciprocity

In this contribution the norm of reciprocity is defined as a basic internal motivation. Using formal tools of game theory, a model of social utility function is presented. The reciprocity model predicts that social actors should reciprocate costs and benefits they receive, even when there are costs in conforming to the norm. Hypotheses about actors' behavior, expectations and evaluations are derived from the model. The hypotheses were tested in an experimental situation, the reciprocity game, consisting of a prisoner's dilemma game (PD) followed by a dictator game (DG). The sample was composed of 74 Italian undergraduate students. In line with the model's predictions, the experimental results showed that participants reciprocate the behavior of the opponent in the PD. In the DG, if the opponent cooperated, participants gave back an almost equal share, whereas if the opponent defected, participants gave a minimal amount. These reciprocity effects are modulated by individual differences in the concern for reciprocity. Copyright © 2000 John Wiley & Sons, Ltd.

The Law of Comparative Advantage Without Social Utility Functions

This paper derives sufficient conditions under which the Law of Comparative Advantage and the General Law of Comparative Advantage are true when the preferences of the trading countries may not be represented by “well‐behaved” social utility functions. It shows that in the neoclassical framework with convex technologies, profit maximization and Walras’ Law, the laws of comparative advantage under a natural trade are still valid if either the General Law of Demand or the Weak Axiom of Revealed Preference holds, or if losers are compensated using lump‐sum transfers or consumption taxes.