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Welfare, Information and Uncertainty

  • Ex-ante and Ex-post Welfare Optimality under Uncertainty,” Economica 48 (1981), 235–250.


    Suppose that either (i) individuals’ subjective probabilities differ from society’s probability assessments, or (ii) social attitudes to individual risk differ from individuals’ own attitudes to risk. Then the social welfare function will not respect individuals’ own preferences for trade in contingent commodities, and Arrow–Debreu markets will not be able to bring about a full ex-post welfare optimum. This paper examines the extent to which markets can bring about such an ex-post welfare optimum. Contingent lump-sum transfers each period are required. Then it suffices to have spot markets each period, provided that consumers’ von Neumann–Morgenstern utility functions are “separable backwards” in time. JSTOR link for paper

  • Utilitarianism, Uncertainty and Information,” in A.K. Sen and B. Williams (eds.) Utilitarianism and Beyond (Cambridge University Press, 1982), ch. 4, pp. 85–102.

  • Ex-Post Optimality as a Dynamically Consistent Objective for Collective Choice Under Uncertainty,” in P.K. Pattanaik and M. Salles (eds.) Social Choice and Welfare (North-Holland, 1983), ch. 10, pp. 175–205.

  • On Welfare Economics with Incomplete Information and the Social Value of Public Information,” Stanford University, Institute of Mathematical Studies in the Social Sciences, Economics Technical Report No. 332 (1981).