Determining the precise nature of the connection between preference, choice, and welfare has arguably been the central project in the field of welfare economics, which aims to offer a proper guide for economists in the making of policy decisions that affect people’s welfare. The two leading approaches here historically – the revealed preference and latent preference approaches – seem equally incapable of so guiding economists. I argue that the deadlock here is due to welfare economists’ failure to recognize a crucial distinction between two senses of “preference.” I analyze and defend these senses of “preference,” and argue that each shares a close connection with just one of choice and welfare. This analysis reveals how economists should conceive of both the connections between “preference,” choice, and welfare, and the proper roles of these concepts in welfare economics. I conclude by showing this analysis to best explain the plausibility of two leading alternative approaches from Hausman and Sugden.
Bibliographical noteFunding Information:
Many thanks to two anonymous referees for helpful comments. And special thanks to Tyler DesRoches for many helpful comments, suggestions, and discussions. Work for this paper was supported by grant PDFS2122-3H02 from the Research Grants Council of Hong Kong.
© 2021 Brill Academic Publishers. All rights reserved.
- Behavioral economics
- Latent preference
- Public policy
- Revealed preference
- Welfare economics