Document Type
Working Paper
Publication Date
2017
Abstract
The “social welfare function” (SWF) is a powerful tool that originates in theoretical welfare economics and has wide application in economic scholarship, for example in optimal tax theory and environmental economics. This Article provides a comprehensive introduction to the SWF framework. It then shows how the SWF framework can be used as the basis for regulatory policy analysis, and why it improves upon cost-benefit analysis (CBA).
Two types of SWFs are especially plausible: the utilitarian SWF, which sums individual well-being numbers, and the prioritarian SWF, which gives extra weight to the well-being of the worse off. Either one of these is an improvement over CBA, which uses a monetary metric to quantify well-being and is thereby distorted by the declining marginal utility of money. The Article employs a simulation model based on the U.S. population survival curve and income distribution to illustrate, in detail, how the two SWFs differ from CBA in selecting risk-regulation policies.
Citation
Matthew D. Adler, A Better Calculus for Regulators: From Cost-Benefit Analysis to the Social Welfare Function (February 28, 2017)
Library of Congress Subject Headings
Welfare economics, Social welfare, Cost effectiveness, Risk
Included in
Administrative Law Commons, Environmental Policy Commons, Health Policy Commons, Policy Design, Analysis, and Evaluation Commons, Public Economics Commons, Social Welfare Commons
Available at: https://scholarship.law.duke.edu/faculty_scholarship/3729