Social choice
All the time in economics and politics, we evaluate or pass judgement on social systems, arrangements and outcomes. We characterize polities, societies and economies as democratic or undemocratic, just or unjust, corrupt or not, good or bad, as we do decisions taken by those in authority and by our fellow citizens. Our judgements here are normally a mix of ethical views, aesthetic and consumer tastes, strategic goals and sheer desires for certain goods or outcomes. At core, they are views about possible desirable social outcomes based on individual preferences, or so social choice theory maintains.
Social choice theory is the study of how decisions are made collectively. It examines the idea that, for a given society, the preferences of individuals can be directly aggregated to reflect a âsocial preferenceâ. In other words, social choice theory is concerned with how it is possible to get from a set of individual preferences to a social outcome in a consistent and rational manner that respects individual preferences. Social choice theory is thus primarily concerned with the connection or relation between individual preferences and social outcomes. More exactly, it is concerned with how to aggregate individual preferences into a collective choice outcome.
Social choice theory is not a single theory but a very broad discipline concerned with a cluster of concerns and questions. Sen sums some of them up well by listing a series of problems that are illustrative of its subject matter.
When would majority rule yield unambiguous and consistent decisions? How can we judge how well a society as a whole is doing in the light of the disparate interests of its different members? How do we measure aggregative poverty in view of the varying predicaments and miseries of the diverse people that make up the society? How can we accommodate rights and liberties of persons while giving adequate recognition to their preferences? How do we appraise social valuations of public goods such as the natural environment, or epidemiological security? (Sen 1999: 350; italics in original)
In sum, social choice theory is concerned to determine a rational and consistent route from individual preferences to social (or group) outcomes. Or, put the other way around, it is concerned with how best to relate social judgements and group decisions to the views and interests of the individuals who make up the society or the group.
The broad field of social choice theory â at least as a systematic discipline â had its beginnings in the mathematical work of some pioneering thinkers in the eighteenth century, in particular, Jean-Charles de Borda (1781) and the Marquis de Condorcet (1785) and, in the nineteenth century, others such as Charles Dodgson (also known as Lewis Carroll) (1874, 1884). Their main concern was democratic decision making, with particular focus on majority decisions. Their ambition was to develop a framework for rational and democratic decisions for a group, paying adequate attention to the preferences and interests of all of its members. However, their logical or theoretical investigations typically yielded rather pessimistic results. Majority rule, for example, can be thoroughly inconsistent, with A defeating B by a majority, B defeating C by a majority, and C also, in turn, defeating A by a majority. This incongruity at the theoretical level, although we may not find it so disturbing in practice, has led to a great deal of head-scratching and logical reasoning for some time.
While Condorcet investigated a particular voting method (majority rule), social choice theory was given its modern form and revival through Kenneth Arrow's famous work on a general approach to the study of preference aggregation. Arrow considered a class of possible aggregation methods, which he called social welfare functions, and asked which of them satisfied a seemingly mild set of conditions of reasonableness, discussed on p. 27 below. What became known as his âimpossibility theoremâ showed that even this set of mild conditions could not be simultaneously satisfied by any social choice procedure within a very wide family (Arrow 1951). This led to a great deal of pessimism both about democracy and welfare assessments because, in order to avoid inconsistencies, both seemed to depend upon dictatorship, which in politics would mean an extreme sacrifice of participatory decisions (one of the underlying presuppositions of social choice theory itself) and in economics would mean a gross inability to be sensitive to the heterogeneous interests of a diverse population. The elegance of Arrow's theorem and this seemingly dark outcome produced veritable libraries of responses, qualifications, modulations and further impossibility results. Sen's interventions in this world were breathtakingly important and simple. He resisted the pessimism by uncovering, and gently criticizing, some of the main presuppositions of the original theorem.
The most important underpinning or presupposition in Arrow's approach was the eschewal of interpersonal comparisons of preferences, understood in terms of utility. Arrow held the view that âthe interpersonal comparison of utility has no meaning and ⌠that there is no meaning relevant to welfare comparisons in the measurability of individual utilityâ (1951: 9). One of the things Sen produced was an elegant way of viewing the unnecessary nature of this condition, partly by showing that it was a consequence not of reasonable conditions for social choice but the result of contemporary economic theoretical dogma, which Arrow had simply followed, or more specifically the result of an odd reaction to utilitarian-inspired welfare economics.
More exactly, traditional welfare economics had been developed by utilitarian economists, such as Francis Edgeworth (1881), Alfred Marshall (1890) and Arthur Pigou (1920), who had not been inspired by the vote-oriented work of Borda (1781) and Condorcet (1785), but by their contemporary Jeremy Bentham (1970 [1781]). Bentham pioneered the use of utilitarian calculus to obtain judgements about the social interest by means of aggregating the personal interests of the different individuals in the form of their respective utilities. There is a central problem with utilitarianism's unique focus on utility and the total utility of the community, at the expense of entertaining any analysis of the distribution of that total across the individuals concerned, about which more on pp. 30, 47. However, for our purposes here, it is sufficient to note that via the concept of utility and total utility, utilitarianism assumed it uncontroversial to be involved in interpersonal comparisons of people's interests. It followed that utilitarian welfare economics was deeply concerned with a class of information â in the form of comparison of utility gains and losses of different persons â for which it would soon be heavily criticized. Although utilitarianism has been very influential in shaping welfare economics, in the 1930s it was to come under fire, particularly for the supposed lack of scientific basis for interpersonal comparisons of utility. Economists came to be persuaded by the arguments of Lionel Robbins and others (deeply influenced by âlogical positivistâ philosophy) that, as Robbins put it, â[e]very mind is inscrutable to every other mind and no common denominator of feelings is possibleâ (Robbins 1938: 636). âThus, the epistemic foundations of utilitarian welfare economics were seen as incurably defectiveâ (Sen 1999: 182).
As a result of this, there followed attempts to do welfare economics on the basis of different personsâ respective ordering of social states without any interpersonal comparisons of utility gains and losses. This further reduced the informational base upon which social choice could draw: an already limited Benthamite calculus was made to shrink even further to the kind of information with which Borda and Condorcet were concerned. This was the case because the use of different personsâ utility rankings without any interpersonal comparison is analytically quite similar to the use of voting information in making social choice. Given this informational restriction, what became known as ânew welfare economicsâ from the 1940s onwards used only one basic criterion for social improvement, that is, âPareto comparisonâ, or the âPareto principleâ. âThis criterion only asserts that an alternative situation would be definitely better if the change would increase the utility of everyoneâ (Sen 1999: 183). Given that the earlier utilitarian tradition was out of favour due to the rise of scepticism about the possibility of interpersonal comparisons of utility, the Pareto principle took centre stage. Much of welfare economics in fact used a slightly stronger version of the principle than the one used by Arrow, namely, the economy is in a Pareto optimal state when no further changes in it can make one person or preference criterion better off without at the same time making another worse off (Walras 1899; Pareto 1906). And economists, it was assumed, could only be in a position to declare an improvement when no such interpersonal comparisons of gains and losses are involved.
At this point, as a consequence of important co...