Daniel Gerszon Mahler

Ph.d.-forsvar: Daniel Gerszon Mahler:"Measuring What Matters? Empirical Essays in Welfare Economics"

A core purpose of economics is to provide knowledge about how to design economic policies. Any discussion about the appropriate design of economic policies hinges on some idea about what matters to society. Frequently, economic policies are judged by the extent to which they generate welfare, where welfare is understood as the satisfaction of preferences. Yet policymakers and ordinary citizens often have other ideas about what welfare is and about the appropriate objective of economic policies, invoking concepts such as freedom, opportunities, and justice. This dissertation contains six chapters, which cast light on whether applying some of these other ideas matters for the design of economic policies.

Chapter 1 introduces the dissertation. Chapter 2 analyzes if prospect theory, a theory known to apply to preference-based measures of welfare, also applies to happiness-based measures of welfare. Chapter 3 measures whether individuals have equal opportunities for obtaining welfare, and assesses whether this depends on how welfare is measured. Both chapters conclude that how welfare is measured matters little for policy design. Chapter 4 improves measures of equality of opportunity by using conditional inference regression trees.

The last two chapters deal with cases where there is a wedge between preference satisfaction and welfare. Chapter 5 analyzes attitudes towards paternalism in areas where some individuals lack information or willpower to act in their own best interest. Chapter 6 assesses voting outcomes when some individuals are altruistic in the sense that they do not vote for the outcome that maximizes their welfare. In both cases, the results indicate that using preferences may yield misleading policy evaluations.

The combined findings of this thesis suggest that using alternative measures of welfare hardly matters as long as internalities, externalities, and public goods are absent.