Fair Management of Social Risk

49 Pages Posted: 8 Feb 2014

See all articles by Marc Fleurbaey

Marc Fleurbaey

Princeton University - Woodrow Wilson School of Public and International Affairs

Stéphane Zuber

Paris School of Economics (PSE)

Date Written: January 31, 2014

Abstract

We provide a general method for extending fair social preferences defined for riskless economic environments to the context of risk and uncertainty. We apply the method to the problems of managing unemployment allowances (in the context of macroeconomic fluctuations) and catastrophic risks (in the context of climate change). It requires paying attention to individuals' risk attitudes and rationality properties of social preferences, revisiting basic ideas from Harsanyi's seminal work (Harsanyi, 1955). The social preferences that we obtain do not in general take the form of an expected utility criterion, but they always satisfy statewise dominance. We also show how non-expected utility individual preferences can be accommodated in the approach.

Keywords: social choice, uncertainty, economic environment, social risk

JEL Classification: D63

Suggested Citation

Fleurbaey, Marc and Zuber, Stéphane, Fair Management of Social Risk (January 31, 2014). Princeton University William S. Dietrich II Economic Theory Center Research Paper No. 059. Available at SSRN: https://ssrn.com/abstract=2391850 or http://dx.doi.org/10.2139/ssrn.2391850

Marc Fleurbaey (Contact Author)

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

Stéphane Zuber

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

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