39 Arrow Sens's Contribution To Welfare
39 Arrow Sens's Contribution To Welfare
39 Arrow Sens's Contribution To Welfare
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Scand. J of Economics 101(2), 163-172, 1999
Kenneth J Arrow
Stanford University, Stanford, CA 94305-6072, USA
I. Introduction
?D The editors of the Scandinavian Journal of Economics 1999. Published by Blackwell Publishers, 108 Cowley Road,
Oxford OX4 1N, UK and 350 Main Street, Malden, MA 02148, USA.
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164 K.J Arrow
of his thought, so that even the most formal work is motivated by philosophi-
cal and ethical considerations, while his most interpretive and broadly
ranging papers remain compatible with rigorous technical analysis.
Because of the wide range of his work on social welfare, I will discuss it
in more detail under five headings: (1) formal theories of social choice; (2)
the formal theory of individual preference and choice; (3) the conceptual
meanings of choice, welfare, and utility; (4) the measurement of social
welfare as reflected in inequality, poverty, and real social income; and (5)
empirical analyses of famine and nutrition related to Sen's work on poverty
and its moral implications. In Section VII, I briefly review a sample of his
work in fields other than the analysis of social welfare.
One general characteristic of Sen's work must be stressed. He is especially
concerned with the distribution of welfare however that concept is under-
stood. Averages for him conceal information relevant to the formulation of
sound ethical judgments. He has therefore emphasized the measurement and
meaning of inequality and in particular poverty as a morally and economic-
ally special category.
A major part of Sen's work has dealt with the formal theory of social choic
The basic paradigm in this field has been that of Arrow (1951).1 It is in t
tradition of welfare economics, which has sought to provide a rational
justification for choice among alternative possible economic policies based
on the preferences of individual members of society. Assume that social
choice, like individual choice, is expressed by a preference ordering over
(social) alternatives, so that the alternative chosen from any given feasible
set of alternatives is the most preferred one. Hence, one formulation of
social choice is that of defining a social ordering governing social choice for
each profile of orderings, one for each individual. In other words, social
choice is defined by a mapping from profiles to social orderings. One can
then state some desirable properties of this mapping and ask if any such
mapping (social welfare function in Arrow's and Sen's terminology) exists;
if social welfare functions do exist, one can attempt to characterize them in
some useful way.
Arrow's conditions can be stated roughly as follows: (U) the social
welfare function is defined for all profiles; (P) if the profile is such that
everyone prefers alternative x to alternative y, then the social ordering sets x
above y (the Pareto principle); (I) the choice between two alternatives
depends only on the individual preferences between those two alternatives
' Dates in parentheses refer to references listed at the end of this article.
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Amartya K Sen 's contributions to the study of social welfare 165
2Dates in brackets refer to publications by Sen listed in the Bibliography. Those preceded
Roman numeral refer to the subject headings of articles written by Sen; those without a Roman
numeral refer to his books.
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166 K.J Arrow
individual's domain of private choice enter into the Pareto judgment. The
result is not only surprising analytically but also addresses profound ethical
questions on the relation between even the vestigial remnant of utilitarianism
contained in the Pareto principle and the existence of individual "rights," a
scope (however small) over which the individual has complete control. Sen's
work has sparked both a technical literature, e.g., Gibbard (1974) and
Suzumura (1978), and contributed to philosophical emphasis on rights from
very diverse critical viewpoints, e.g., Nozick (1974) and Dworkin (1978).
A very different line of analysis pursued by Sen has concerned the
possibility of resolving the social choice problem by assuming that the range
of individual preferences which need to be aggregated is narrowed from the
universal range postulated in condition (U). In particular, he has stated
conditions on profiles under which pairwise majority voting leads to an
ordering. Inada (1964) had found two conditions other than Black's single-
peakedness of preferences, and Ward (1965) had generalized Black's condi-
tion. Sen [I, 1966] introduced a condition (extremal value restriction) which
included all previous ones: in any triple of alternatives, there are one
alternative and one value (best, middle, or worst) such that no one ranks that
alternative at that value. Later, Sen and P. Pattanaik [I, 1969) found
necessary and sufficient conditions whereby majority voting yields a well-
defined first choice. Sen thus both made a major early contribution to this
particular subfield and collaborated in establishing the definitive results.
More representative of Sen's general position is his systematization of the
information constraints on social choice. As he observes in his article
"Interpersonal Aggregation and Partial Comparability" [I, 1970b], Arrow's
assumption of interpersonally incomparable ordinalism is an extreme case.
Interpersonally incomparable cardinalism does not get us any further in
avoiding impossibility results [1970, Theorem 8*2], a result greatly deep-
ened by Kalai and Schmeidler (1977). In effect, the assumption that
individual judgments, ordinal or cardinal, cannot be compared implies that
social judgments must be invariant under a wide range of independent
transformations of individual preferences (all monotone transformations in
the ordinal case, all affine transformations in the cardinal case). For any
degree of interpersonal comparability (e.g., that the ratio of unit utility
changes for two individuals is judged to lie between two prescribed limits),
the invariance requirements on the social welfare function are correspond-
ingly lightened, and the possibility of finding an acceptable social choice
procedure increased. For a survey of this point of view in subsequent
research, see Sen [I, 1977b].
The research stemming from Sen's argument has indeed been rich. This is
one of the areas where Sen's contribution has been the formulation of the
question and the inspiration of others. It is, of course, well known that
complete interpersonal comparability of unit utility differences permits -
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Amartya K Sen k contributions to the study of social welfare 167
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168 K. Arrow
(xRy) if and only if, for some S, x belongs to C(S) and y belongs to S.
State the Weak Congruence Axiom (WCA):
If xRy, then for any S such that y belongs to C(S) and x belongs to S, x must
also belong to C(S).
Also state properties (a) and (/f):
Note: Sen also shows that WCA is equivalent to the statements that R is an
ordering and that C*(S) = C(S), where C*(S) is the set of elements of S
which are maximal with respect to R.
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Amartya K. Sen s contributions to the study of social welfare 169
Social choice theory and utilitarianism seek to base social judgments on the
welfares of the individual members of society; in different variants, differing
assumptions are made about the properties of welfare measurements (ordinal,
cardinal, interpersonally comparable cardinal, and so forth). In some articles,
e.g., [II, 1979], Sen has developed a fundamental critique of this doctrine of
"welfarism," as he calls it. He has argued for distinguishing aggregation of
judgments of different people about social policy from aggregation of inter-
ests. For the former, only information about individual preferences is avail-
able, and the Impossibility Theorem is relevant. For aggregation of interests,
on the other hand, there is additional information beyond any measure of
individual welfares, in particular, measurement of inequality in objective
terms. Also, the forms of consumption that give rise to pleasures might be
morally relevant for given utility levels (e.g., pleasures arising from sadism
and masochism). Even the Pareto principle can be questioned along these
lines, and the paradox of the Pareto liberal (see Section II) shows that there
can be principles which we regard as overriding the Pareto principle.
This line of argument has been developed further by Sen [1985, 1987, and
1992]. A given set of commodities may be utilized in different ways by a
consumer, though the range of possible utilization modes may be restricted
by an individual's personal limitations. Utility in the usual sense may be
identified with happiness or fulfillment of desires. But neither the valuation
to be placed on the chosen utilization nor the choice made by the individual
need be related to the utility nor indeed to well-being in any sense.
Further, judgment of a given state of affairs may rationally depend, not
merely on the alternative utilization chosen but on the range of alternatives
available to the individual, including those not chosen. There is a preference
for capability (or freedom of choice); poverty and disability are infringe-
ments on capability.
Sen's general concerns about the meaning of social policy and individual
variations in the capacity for functioning have found applications in develop-
ing appropriate measures of income inequality. His paper with Partha
Dasgupta and David Starrett [III, 1973b; see also III, 1978] introduced new
criteria for measures of income inequality, essentially formalizing the
"transfer principle" of H. Dalton, that a transfer from a rich individual to a
poor one must be regarded as a reduction in inequality. Mathematically, this
leads to the implication that the function expressing inequality in terms of
individual incomes must be S-concave, a weaker condition than concavity or
even quasi-concavity. From this, they show that in order for one income
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170 K J Arrow
P= H[I+(I -I)G],
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Amartya K Sen 's contributions to the study of social welfare 171
Sen has written on many other topics than social welfare, broad as that
is. To judge by the references, this work has had very important effects. I
have followed only part of this work; in this section, I make very brief
references to the questions that I have followed.
One is the meaning of rationality in individual choice. Perhaps no single
paper of Sen's has been more cited than his "Rational Fools" [IV, 1977], in
which he shows how limited the ordinary concept of rationality is in covering
the range of motives in individual choice; in particular, the role of commit-
ment is completely ignored. More recently, in "Maximization and the Act of
Choice" [IV, 1997], he has shown that concepts of maximization are not
necessarily connected with the implication of an ordering of alternatives.
Another continuing interest has been the achievement of efficiency in
economic development. While the general theoretical thrust has been less
novel than in his work on social welfare, his contributions have been of a
very high order, especially since they frequently flew in the face of then
current political dogmas accepted by many economists. This work com-
menced with his early book on choosing among techniques of production
[1960a] and continued with many papers on the evaluation of projects
culminating in the handbook on project evaluation for the United Nations
International Development Organization, written jointly with Partha Das-
gupta and Stephen A. Marglin [1972].
Two papers on the rate of discount appropriate to government investment
[XI, 1967 and 1982] have stressed the role of externalities in the form of
public concern for the future. Closely related has been his contribution to the
theory of optimal savings [IX, 1961 a, 1967, and 1975].
In a very different vein, Sen has addressed the idea that the value systems
of India and other Asian countries are so different from that of the West that
the polity and economy cannot be organized along Western lines, that
democracy, for example, is inappropriate in South and East Asia. His articles
[XIY 1993a, 1993b, and 1996] have shown that a deeper knowledge of the
Indian and Asiatic pasts would reveal far less uniformity and far more
strands of rational analysis and democratic thinking than is asserted by self-
interested participants in the debate.
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172 K.J Arrow
VIII. Summary
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