Broadening the validity of welfare economics for quantitative public policy analysis

Authored by: Richard E. Just , Andrew Schmitz

The Routledge Handbook of Agricultural Economics

Print publication date:  July  2018
Online publication date:  July  2018

Print ISBN: 9781138654235
eBook ISBN: 9781315623351
Adobe ISBN:

10.4324/9781315623351-2

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Abstract

The joint implications for welfare measurement in three recent literatures are considered for broadening the scope of welfare economics: the behavioral welfare economics literature, the structural versus reduced form debate in econometrics, and the use of sufficient statistics for characterizing behavior. Real world data as well as experimentation reflect a wide variety of so-called anomalous behavioral criteria. Sufficient statistics permit aggregation under heterogeneous behavioral criteria to facilitate meaningful economic welfare analysis. Atheoretic reduced form and traditional treatment-effect econometrics do not support economic welfare analysis, but marginal treatment-effect econometrics is useful for a certain type of policy problems. More generally, however, estimation of sufficient statistics offers possibilities using theory-based reduced form econometrics. Sufficient statistics are further suggested for general equilibrium welfare measurement. Under certain assumptions, robust concepts of economic welfare measurement emerge that rationalize the terminology and concepts of traditional welfare economics, although with a much broader conceptual basis.

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