What is the general Welfare? Welfare Economic Perspectives (2501.08244v2)

Abstract: Researchers do not know what the framers of the United States Constitution intended when they wrote of the general Welfare. Nevertheless, economists can conjecture by specifying social welfare functions that aim to express the preferences of the population. Economists have often simplified utilitarian analysis of public policy by assuming that individuals have homogeneous, consequentialist, and self-centered preferences. In reality, individuals may hold heterogeneous private and social preferences. To enhance policy analysis, I argue that economists should specify social welfare functions that express the richness and variety of actual personal preferences over social states. The possibilities are vast. I focus on preferences for population prosperity and equity. There has been much controversy regarding interpretation of equity, a term that public discourse has used in vague and conflicting ways. Specifying social welfare functions that formally express different interpretations of equity may not eliminate disagreements, but it should clarify concepts of equity and reduce the inconsistencies that afflict verbal communication.

• The paper critiques simplified welfare functions that ignore heterogeneous individual preferences in real societies.
• It contrasts personalist utility aggregation with normative, deontological approaches to highlight policy limitations.
• Manski advocates incorporating empirical evidence of diverse socio-ethical values to enhance effective, inclusive public policy.

Critical Evaluation of "What is the general Welfare? Welfare Economic Perspectives"

Charles F. Manski's scholarly paper, "What is the general Welfare? Welfare Economic Perspectives," provides a nuanced examination of the concept of the general welfare, as derived from welfare economics, and its implications for policy formulation in democratic settings. Although the framers of the United States Constitution included the idea of promoting the general welfare, they did not concretely define it, leaving economists the challenging task of interpreting and operationalizing this goal within public policy.

Key Arguments and Analysis

Manski critiques traditional economic approaches that often employ simplified social welfare functions, which fail to capture the heterogeneity of individual preferences in real-world societies. His examination traces the historical reliance on personalist welfare functions, which aggregate individual utilities but typically neglect broader social, ethical considerations. He contrasts this with the non-personalist approach of moral philosophy, which often imposes external normative criteria such as equity and justice, independent of individual preferences.

The paper outlines several strategies used by economists to work with this complexity:

1. Circumvention of Explicit Welfare Functions: Economists have historically attempted to evade value-laden choices by utilizing constructs like Pareto efficiency and Kaldor-Hicks efficiency, though these approaches inadequately address the distribution of welfare.
2. Consequentialist Self-Centered Preferences: Many welfare analyses assume that individuals are solely concerned with personal outcomes—an assumption Manski critiques for ignoring altruistic and ethical preferences. He critiques common practices such as optimal income taxation models, which rely heavily on speculative assumptions about homogeneous individual preferences under simplified scenarios.
3. Empirical Incorporation of Heterogeneous Preferences: Manski advocates for the incorporation of broader and more heterogeneous preferences, including social and deontological values, suggesting that welfare functions should reflect individuals' concern for distributional equity and mechanisms of preference aggregation.

Implications and Future Directions

Manski's paper implies a need for welfare economics to evolve by robustly integrating empirical evidence reflecting the diverse preferences existing over social states. He eschews a one-size-fits-all approach to welfare functions, promoting instead nuanced models that account for societal pluralism. The utility of alternatives to utilitarian paradigms is discussed, including maximin and minimax-regret criteria, which furnish equity guarantees traditionally absent in utilitarian models.

The work also proposes critical consideration regarding moral constraints and economic practices in public policies such as taxation and criminal justice, where too often, cost-benefit analyses fall short by undervaluing socio-ethical implications.

Conclusion

In his comprehensive critique of welfare economics, Manski emphasizes realism in policy analysis over theoretical elegance, urging for empirical analysis that accurately reflects the diversity in human preferences and values in democratic societies. While challenging, this endeavor is necessary to better inform policy decisions aimed at genuinely promoting a society's general welfare. His insights stimulate future research into innovative aggregation mechanisms that consider fairness and equity, possibly leading to more inclusive and effective public policies.