Oskar Morgenstern Lecture

Welfare Economics, the study of economic well-being, consists of two separate branches, one concerning individual well-being, the other concerning social aggregation. The first branch includes the standard revealed preference paradigm as well as tools from Behavioral Welfare Economics. The second branch subsumes work on social choice and welfare.

Vast literatures study these issues from a normative perspective. They ask, how should we evaluate individual well-being? How should we determine overall social welfare? The normative principles that have emerged from these inquiries have proven useful in innumerable applications.

The objective of this research agenda is to study these issues from a positive perspective. We ask, how do people actually evaluate what is good and bad for other individuals? How do they actually aggregate to reach conclusions about social welfare?

Research in positive welfare economics is valuable because it helps us understand why societies adopt particular policies. With respect to aggregation, it helps us understand how people think their societies ought to balance majority preference against the protection of minorities, judgments which (arguably) their elected representatives ought to respect. It also helps us understand how behavioral considerations, such as cognitive biases, can influence policy formation.

This work departs from most (but not all) of the literature on social preferences by focusing on outcomes for others without implicating selfish concerns.

Vote-trading is common practice in committees and group decision-making. Yet we know very little about its properties. Inspired by the similarity between the logic of sequential rounds of pairwise vote-trading and matching algorithms, we explore three central questions that have parallels in the matching literature: (1) Does a stable allocation of votes always exists? (2) Is it reachable through a decentralized algorithm? (3) What welfare properties does it possess? We prove that a stable allocation exists and is always reached in a finite number of trades, for any number of voters and issues, for any separable preferences, and for any rule on how trades are prioritized. Its welfare properties, however, are guaranteed to be desirable only under specific conditions. A laboratory experiment confirms that stability has predictive power on the vote allocation achieved via sequential pairwise trades, but lends only weak support to the dynamic algorithm itself. Joint work with Alessandra Casella.