[北大微观经济学课件]Ch31 Welfare.ppt

Chapter Thirty-One Welfare Social Choice Different economic states will be preferred by different individuals. How can individual preferences be “aggregated” into a social preference over all possible economic states? Aggregating Preferences x, y, z denote different economic states. 3 agents; Bill, Bertha and Bob. Use simple majority voting to decide a state? Aggregating Preferences Aggregating Preferences Aggregating Preferences Aggregating Preferences Aggregating Preferences Aggregating Preferences Aggregating Preferences Aggregating Preferences Aggregating Preferences Aggregating Preferences Aggregating Preferences Aggregating Preferences Aggregating Preferences Manipulating Preferences As well, most voting schemes are manipulable. I.e. one individual can cast an “untruthful” vote to improve the social outcome for himself. Again consider rank-order voting. Manipulating Preferences Manipulating Preferences Manipulating Preferences Manipulating Preferences Manipulating Preferences Manipulating Preferences Manipulating Preferences Manipulating Preferences Desirable Voting Rule Properties 1. If all individuals’ preferences are complete, reflexive and transitive, then so should be the social preference created by the voting rule. 2. If all individuals rank x before y then so should the voting rule. 3. Social preference between x and y should depend on individuals’ preferences between x and y only. Desirable Voting Rule Properties Kenneth Arrow’s Impossibility Theorem: The only voting rule with all of properties 1, 2 and 3 is dictatorial. Desirable Voting Rule Properties Kenneth Arrow’s Impossibility Theorem: The only voting rule with all of properties 1, 2 and 3 is dictatorial. Implication is that a nondictatorial voting rule requires giving up at least one of properties 1, 2 or 3. Social Welfare Functions 1. If all individuals’ preferences are complete, reflexive and transitive, then so should be the social preference created by the voting rule. 2. If all indi