Utilitarian Welfare Research Articles

EXPRESS: Fairness as a Robust Utilitarianism

This article focuses on the social choice problem in which decisions are based on the utility of multiple stakeholder types. The sum of these utilities – Utilitarian welfare - is one of the most important objectives in solving the social choice problem. While it is the most efficient solution, maximizing Utilitarian welfare may lead to unfair outcomes. However, Encouraging a Utilitarian decision-maker to adopt a fair decision is challenging due to the associated efficiency loss. This article takes a novel perspective by motivating a Utilitarian decision-maker to make fair decisions from an uncertainty-averse standpoint. We study the problem where the proportions of stakeholder types are uncertain and propose a distributionally robust optimization (DRO) model that maximizes the worst-case Utilitarian welfare over an ϕ-divergence-based uncertainty set. We provide three aspects of the relationship between fairness and the uncertain-averse Utilitarian welfare maximization. First, we establish that the worst-case Utilitarian welfare adheres to all five axioms of unfairness-averse cardinal welfare functions with two stakeholder types and satisfies four of these when this number exceeds two. Second, we demonstrate that with the maximal extent of uncertainty aversion, the DRO model identifies the Egalitarian welfare maximizer, which prioritizes fairness. Further, given serveral conventional assumptions, the proposed model selects the Nash welfare maximizer, an objective trade-off between efficiency and fairness, with moderate levels of uncertainty aversion. Lastly, we present numerical studies of two specific instances of the social choice problem – resource allocation and facility location – to show that, as uncertainty aversion increases, our model increasingly emphasizes fairness.

Neural Reward Representations Enable Utilitarian Welfare Maximization.

From deciding which meal to prepare for our guests to trading off the proenvironmental effects of climate protection measures against their economic costs, we often must consider the consequences of our actions for the well-being of others (welfare). Vexingly, the tastes and views of others can vary widely. To maximize welfare according to the utilitarian philosophical tradition, decision-makers facing conflicting preferences of others should choose the option that maximizes the sum of the subjective value (utility) of the entire group. This notion requires comparing the intensities of preferences across individuals. However, it remains unclear whether such comparisons are possible at all and (if they are possible) how they might be implemented in the brain. Here, we show that female and male participants can both learn the preferences of others by observing their choices and represent these preferences on a common scale to make utilitarian welfare decisions. On the neural level, multivariate support vector regressions revealed that a distributed activity pattern in the ventromedial prefrontal cortex (VMPFC), a brain region previously associated with reward processing, represented the preference strength of others. Strikingly, also the utilitarian welfare of others was represented in the VMPFC and relied on the same neural code as the estimated preferences of others. Together, our findings reveal that humans can behave as if they maximized utilitarian welfare using a specific utility representation and that the brain enables such choices by repurposing neural machinery processing the reward others receive.

Surprise by Anticipated Inflation

This paper proposes a theoretical model with two types of households to explore the distributional effects of inflation, assess the non-neutrality of money; and in return, to provide a guideline for policymakers in setting inflation rate. An impatient borrower who faces a borrowing constraint holds a positive amount of debt in equilibrium while a patient lender engages in consumption smoothing. Hence, inflation affects net worth of borrowers via nominal debt by redistributing resources away from lender, rendering welfare gains for the borrower and losses for the lender; and the structure of borrowing constraint gives rise to non-neutrality of anticipated inflation. The utilitarian welfare gain from generating inflation in a cashless economy is amplified when heterogeneous productivity levels are assumed. Yet, incorporating money demand in the form of money-in-utility model suggests that an inflation tax as an additional distortion reverses the overall positive effect of generating inflation in the cashless economy. JEL Classifications: E31, E37, E41, E52, D63.

Completing Priceable Committees: Utilitarian and Representation Guarantees for Proportional Multiwinner Voting

When selecting committees based on preferences of voters, a variety of different criteria can be considered. Two natural objectives are maximizing the utilitarian welfare (the sum of voters' utilities) and coverage (the number of represented voters) of the selected committee. Previous work has studied the impact on utilitarian welfare and coverage when requiring the committee to satisfy minimal requirements such as justified representation or weak proportionality. In this paper, we consider the impact of imposing much more demanding proportionality axioms. We identify a class of voting rules that achieve strong guarantees on utilitarian welfare and coverage when combined with appropriate completions. This class is defined via a weakening of priceability and contains prominent rules such as the Method of Equal Shares. We show that committees selected by these rules (i) can be completed to achieve optimal coverage and (ii) can be completed to achieve an asymptotically optimal approximation to the utilitarian welfare if they additionally satisfy EJR+. Answering an open question of Elkind et al. (2022), we use the Greedy Justified Candidate Rule to obtain the best possible utilitarian guarantee subject to proportionality. We also consider completion methods suggested in the participatory budgeting literature and other objectives besides welfare and coverage.

Welfare Maximization in Perpetual Voting (Student Abstract)

We study the computational problems associated with maximizing various welfare objectives—namely utilitarian welfare, egalitarian welfare, and Nash welfare—in perpetual voting, a sequential collective decision-making framework. Prior work look into notions of fairness over time and study extensions of single-round voting rules to the multi-round setting. We show that while a utilitarian-welfare maximizing outcome can be computed efficiently, an outcome that maximizes egalitarian or Nash welfare is computationally intractable, even in the case of two candidates. We complement this by showing that maximizing egalitarian welfare is fixed-parameter tractable in the number of agents, and maximizing egalitarian or Nash welfare is W[2]-hard and slicewise polynomial in the number of timesteps. We also provide an approximation algorithm for maximizing egalitarian welfare and study strategyproofness with respect to these welfare objectives. Finally, we show that a simple greedy algorithm can achieve approximate proportionality in this setting.

Welfare maximization in stable sharing services

We propose a model of sharing of public services among local governments. Our model is an application of Nicoló et al. (2023) and combines features of two models: assignment games (Shapley and Shubik, 1971) and the division problem (Sprumont, 1991). I show that the SAM algorithm provided in Nicoló et al. (2023) generates a stable allocation that maximizes utilitarian welfare when preferences are Euclidean single-peaked. We then discuss the incentive compatibility of the solution proposed and the relation with welfare functions different from the utilitarian one.

An Equivalence Between Fair Division and Wagering Mechanisms

We draw a surprising and direct mathematical equivalence between the class of fair division mechanisms, designed to allocate divisible goods without money, and the class of weakly budget-balanced wagering mechanisms, designed to elicit probabilities. Although this correspondence between fair division and wagering has applications in both settings, we focus on its implications for the design of incentive-compatible fair division mechanisms. In particular, we show that applying the correspondence to competitive scoring rules, a prominent class of wagering mechanisms based on proper scoring rules, yields the first incentive-compatible fair division mechanism that is both fair (proportional and envy-free) and responsive to agent preferences. Moreover, for two agents, we show that competitive scoring rules characterize the whole class of nonwasteful and incentive-compatible fair division mechanisms, subject to mild technical conditions. As one of several consequences, this allows us to resolve an open question about the best possible approximation to optimal utilitarian welfare that can be achieved by any incentive-compatible mechanism. Finally, because the equivalence greatly expands the set of known incentive-compatible fair division mechanisms, we conclude with an evaluation of this entire set, comparing the mechanisms’ axiomatic properties and examining their welfare performance in simulation. This paper was accepted by Yan Chen, behavioral economics and decision analysis. Supplemental Material: The data and online appendix are available at https://doi.org/10.1287/mnsc.2022.02615 .

Balanced equilibrium in pseudo-markets with endowments

In a variant of Hylland and Zeckhauser (1979)'s model that allows agents to start out with different endowments, we develop a pseudo-market procedure that allows the policymaker to decide to what extent individual endowment differences shall be balanced by the average endowment. Our procedure sidesteps the known non-existence problem of Walrasian equilibria, and finds an efficient and balanced individually-rational allocation. Envy in our procedure is justified in a utilitarian sense: an envying agent's endowment must make a lower contribution to standard weighted utilitarian welfare than that of the envied agent.

Unemployment insurance design with repeated choices

Abstract This article characterizes the relation between the equilibrium unemployment insurance replacement rate and the frequency of its political choice. We first use a tractable analytical model to show how insurance, incentive, and redistribution effects interact at the equilibrium. We then examine a fully repeated choices equilibrium in a quantitative heterogeneous agents model and show that unemployment persistence, whether a policy is announced first or not, and the type of the political process are key determinants of the relation between the equilibrium replacement rate and the frequency of its choice. In a utilitarian welfare context, we find that the equilibrium replacement rate is higher if the policy is chosen more frequently but this relation is reversed in a median voter context.

Asymptotic Welfare Performance of Boston Assignment Algorithms

We make a detailed analysis in a special case of the Boston algorithm, which is widely used around the world to assign students to schools. We compute the limiting distribution in large random markets of both the utilitarian welfare and the order bias, a recently introduced average-case fairness measure. Our results show that the differences in utilitarian welfare between the Boston algorithms and the serial dictatorship (SD) algorithm are small and positive, whereas the differences in terms of order bias are large and positive. The naive implementation of the Boston algorithm beats its adaptive implementation on both utilitarian welfare and order bias, and both apparently beat SD on both criteria. In order to establish our results, we derive several basic results on the time evolution of the assignments made by the algorithms, which we expect to be useful for other applications. For example, we compute limiting distributions as a function of [Formula: see text] of the exit time and preference rank obtained for an arbitrary agent whose initial relative position in the tiebreak order is θ.

Contracts for primary and secondary care physicians and equity-efficiency trade-offs

We analyse how payment systems for general practitioners (GPs) and hospital specialists affect inequalities in healthcare treatments, referrals, and patient health. We present a model of contracting with two providers, a GP and a hospital specialist, with patients differing in severity and socioeconomic status, and the GP only receiving an informative signal on severity. We investigate four health system configurations depending on whether the GP refers and the specialist treats only high-severity patients or patients with any severity. We show that an increase in the GP fee, which induces GPs to refer only high-severity patients, increases utilitarian welfare but also increases inequities in access to specialist visits. A reduction in the DRG reimbursement to hospital specialists, which induces specialists to treat only high-severity patients, increases utilitarian welfare but also increases inequities in access to specialist visits when the GP refers only high-severity patients.

Supermajority politics: Equilibrium range, policy diversity, utilitarian welfare, and political compromise

The standard Bowen model of political competition with single-peaked preferences (Bowen, 1943) predicts party convergence to the median voter’s ideal policy, with the number of equilibrium policies not exceeding two. This result assumes majority rule and a unidimensional policy space. We extend this model to static and dynamic political economies where the voting rule is a supermajority rule, and the policy space is totally ordered. We show that the exact number of equilibria in these settings is an increasing correspondence of the supermajority’s size. Our findings have implications for the depth of policy diversity across structurally identical supermajoritarian political economies. We also examine the equilibrium effects of supermajority rules on utilitarian welfare and political compromise under uncertainty.

Computing welfare-Maximizing fair allocations of indivisible goods

We analyze the run-time complexity of computing allocations that are both fair and maximize the utilitarian social welfare, defined as the sum of agents’ utilities. We focus on two tractable fairness concepts: envy-freeness up to one item (EF1) and proportionality up to one item (PROP1). We consider two computational problems: (1) Among the utilitarian-maximal allocations, decide whether there exists one that is also fair; (2) among the fair allocations, compute one that maximizes the utilitarian welfare. We show that both problems are strongly NP-hard when the number of agents is variable, and remain NP-hard for a fixed number of agents greater than two. For the special case of two agents, we find that problem (1) is polynomial-time solvable, while problem (2) remains NP-hard. Finally, with a fixed number of agents, we design pseudopolynomial-time algorithms for both problems. We extend our results to the stronger fairness notions envy-freeness up to any item (EFx) and proportionality up to any item (PROPx).

The welfare effects of tax progressivity in a frictional labor market

A progressive tax schedule is usually justified in terms of redistribution and insurance. When the labor market is frictional and there is no intensive margin of labor supply, progressive taxation has been shown to reduce unemployment by lowering wages. However, a more progressive tax schedule discourages the individual's supply of labor and (precautionary) savings, thus potentially reducing capital accumulation and total production.I examine the different effects of a progressive tax and transfer schedule on unemployment, labor income, an individual's labor supply, and savings. My modeling strategy follows Setty and Yedid-Levi (2020), who build on the workhorse model of Krusell et al. (2010), to which I add individual labor supply. I allow for ex ante heterogeneity in productivity, as well as in preferences, while the only idiosyncratic risk is the endogenous risk of unemployment. I compare my baseline model with a frictional labor market to one with a Walrasian labor market where the unemployment risk is exogenous.Steady state comparisons, based on a utilitarian welfare criterion, show that a tax and transfer schedule with a positive degree of progressivity is optimal in both frameworks, and that the presence of labor market friction implies that the optimal level of progressivity is (slightly) higher.

Kantians defy the economists’ mantra of uniform Pigovian emissions taxes

This paper investigates the efficiency-restoring (= Pigovian) taxation of emissions in economies with pollution damage and consumers who are morally motivated to reduce their emissions and who are heterogeneous with respect to their degree of morality or other preference parameters. If the conventional concept of efficiency is applied that relates to the maximum utilitarian welfare disregarding the consumers’ morality, we show that the Pigovian tax is consumer-type specific and smaller than the uniform Pigovian tax in economies with consumers without moral preferences. Since ‘personalized’ Pigovian taxes cannot be implemented in practice due to informational infeasibility, we also characterize the second-best uniform emissions tax. Finally, we investigate the Pigovian taxation when the emissions tax crowds out the moral consumers’ voluntary incentives to reduce emissions.

Perilaku Pemerintah Indonesia Dalam Memaksimalkan Welfare (Pendekatan Rawlasian-Utilitarian)

The concept of utilitarian welfare in Indonesia is identically applied to the implementation of the government's fiscal capacity policy. The research design is a quantitative concept, namely an experimental design using the weights of measuring income per capital, taxes, subsidies as a function of Iriani-Tamoka welfare with the central government constraint is to maximize the social welfare of the community. The results of the study found that government behavior in setting the tax burden is identical to utilitarian behavior in maximizing the welfare of its people. The government's transfer policy through social assistance and social security which is distributed to the community as an effort by the government to maximize utility through public welfare under the constraints of subsidy allocation and the multiplier effect caused by the determination of government taxes is identical to Rawlsian's behavior.

When is utilitarian welfare higher under insurance risk pooling?

This paper considers the effect of bans on insurance risk classification on utilitarian social welfare. We consider two regimes: full risk classification, where insurers charge the actuarially fair premium for each risk, and pooling, where risk classification is banned and for institutional or regulatory reasons, insurers do not attempt to separate risk classes, but charge a common premium for all risks. For iso-elastic insurance demand, we derive sufficient conditions on higher and lower risks' demand elasticities which ensure that utilitarian social welfare is higher under pooling than under full risk classification. Using the concept of arc elasticity of demand, we extend the results to a form applicable to more general demand functions. Empirical evidence suggests that the required elasticity conditions for social welfare to be increased by a ban may be realistic for some insurance markets.

도자 기술에 대한 오주(五洲) 이규경(李圭景)의 이용후생적 관점 고찰

This paper surveyed Yi Kyukyung’s views on ceramic technologies. First I divided his opinions from citations in his writings. While citation authorities were simply mentioned, I dealt with his views and demonstrations mainly. Throughout this process I came to know he preceeded this opinions collecting and analyzing articles on ceramic materials, technologies and practical uses.<BR> Ojuyeonmunjangjeonsango contains some ceramic articles. In this paper I expanded ceramic range, so tried to study roof tile and brick. Because I thought essence of ceramic lies in clay’s revival in the flame, and purpose of wares lies in utilities basically.<BR> His dialectics cited many articles from old writings on one theme and added his opinions in the halfway or in the end. Basically while this is the methodology of study of old documents, he tried to change the Joseon realities and upgrade the life qualities of Joseon people with utilitarian welfare.

Balanced voting

We introduce ‘Balanced Voting’, a voting scheme tailored to fundamental societal decisions. It works as follows: Citizens may abstain from voting on a fundamental direction in a first stage. This guarantees the voting right in a second voting stage on the variants of the fundamental direction chosen in the first. All ‘losers’ from the first stage also obtain voting rights in the second stage, while ‘winners’ do not. We develop a model with two fundamental directions and variants of these directions. Information about the preferences is private. We identify circumstances under which Balanced Voting performs well with regard to utilitarian welfare and Pareto dominance. We discuss the robustness of the results, procedural rules to implement the voting scheme, and extensions. Moreover, we provide several examples for which the scheme might be applied.

Oligopoly under incomplete information: On the welfare effects of price discrimination

We study competition by firms that simultaneously post (potentially nonlinear) tariffs to consumers who are privately informed about their tastes. Market power stems from informational frictions, in that consumers are heterogeneously informed about firms’ offers. In the absence of regulation, all firms offer quantity discounts. As a result, relative to Bertrand pricing, imperfect competition benefits disproportionately more consumers whose willingness to pay is high, rather than low. Regulation imposing linear pricing hurts the former but benefits the latter consumers. While consumer surplus increases, firms’ profits decrease, enough to drive down utilitarian welfare. By contrast, improvements in market transparency increase utilitarian welfare, and achieve similar gains on consumer surplus as imposing linear pricing, although with limited distributive impact. On normative grounds, our analysis suggests that banning price discrimination is warranted only if its distributive benefits have a weight on the societal objective.