Document Type

Working Paper

Publication Date



Social Welfare Function, CBA, Risk Regulation, Utilitarian, Prioritarian


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.

Library of Congress Subject Headings

Welfare economics, Social welfare, Cost effectiveness, Risk