Beyond Revealed Preference: Choice-Theoretic Foundations for Behavioral Welfare Economics*

B. Douglas Bernheim, Antonio Rangel
2009 Quarterly Journal of Economics  
This paper proposes a choice-theoretic framework for evaluating economic welfare with the following features. (1) In principle, it is applicable irrespective of the positive model used to describe behavior. (2) It subsumes standard welfare economics both as a special case (when standard choice axioms are satis...ed) and as a limiting case (when behavioral anomalies are small). (3) Like standard welfare economics, it requires only data on choices. (4) It is easily applied in the context of
more » ... he context of speci...c behavioral theories, such as the ; model of time inconsistency, for which it has novel normative implications. (5) It generates natural counterparts for the standard tools of applied welfare analysis, including compensating and equivalent variation, consumer surplus, Pareto optimality, and the contract curve, and permits a broad generalization of the of the ...rst welfare theorem. (6) Though not universally discerning, it lends itself to principled re...nements. We would like to thank
doi:10.1162/qjec.2009.124.1.51 fatcat:y5s5aqayejdmvn2isfmqbui5ey