Most countries exhibit large and persistent geographical differences in wages, income, and unemployment rates. A growing class of place-based policies attempts to address these differences through ...public investments and subsidies that target disadvantaged neighborhoods, cities, or regions. Place-based policies have the potential to profoundly affect the location of economic activity, along with the wages, employment, and industry mix of communities. These programs are widespread in the United States and throughout the world but have only recently been studied closely by economists. We consider the following questions: Who benefits from place-based interventions? Do the national benefits outweigh the costs? What sorts of interventions are most likely to be effective? To study these questions, we develop a simple spatial equilibrium model designed to characterize the welfare effects of place-based policies on the local and the national economy. Using this model, we critically evaluate the economic rationales for place-based policies and assess the latest evidence on their effects. We conclude with some lessons for policy and directions for future research.
Traditional welfare economics works with the assumption of the fully rational economic agent (homo economicus) whose preferences are fixed: that is, they are not influenced by their economic ...environment. To the contrary, this book presents a theory of welfare economics that maintains the principles of normative individualism while allowing for adaptive or changeable preferences.
Why do economists talk of preferences? In this book, Carl Christian von Weizsäcker shows that the concept is intimately related to freedom of action. The concept of preferences is the mode by which normative economics introduces the idea of freedom or liberty into its theory of human interaction. Moreover, the economic research of recent decades has provided a large amount of experimental and other empirical findings - e.g. the work on bounded rationality - which contradicts the assumption of fixed preferences. This book argues that this large body of findings is consistent with the hypothesis of adaptive preferences. This, together with the proposition that adaptive preferences allow a generalization of traditional welfare economics, has implications for policy applications of behavioral economics based on "normative individualism". Normative individualism is an approach which intrinsically connects with the value of liberty or freedom. It is argued that normative individualism is indispensable for a society of free citizens, thus providing the foundations of civil liberty.
This book will be of great interest to readers of welfare economics, behavioral economics and economic theory.
We propose a broad generalization of standard choice-theoretic welfare economics that encompasses a wide variety of nonstandard behavioral models. Our approach exploits the coherent aspects of choice ...that those positive models typically attempt to capture. It replaces the standard revealed preference relation with an unambiguous choice relation: roughly, x is (strictly) unambiguously chosen over y (written xP*y) iff y is never chosen when x is available. Under weak assumptions, P* is acyclic and therefore suitable for welfare analysis; it is also the most discerning welfare criterion that never overrules choice. The resulting framework generates natural counterparts for the standard tools of applied welfare economics and is easily applied in the context of specific behavioral theories, with novel implications. Though not universally discerning, it lends itself to principled refinements.
The contributions of economists have long included both positive explanations of how economic systems work and normative recommendations for how they could and should work better. In recent decades, ...economics has taken a strong empirical turn as well as having a greater appreciation of the importance of the complexities of real‐world human behaviour, institutions, the strengths and failures of markets, and interlinkages with other systems, including politics, technology, culture and the environment. This shift has also brought greater relevance and pragmatism to normative economics. While this shift towards evidence and pragmatism has been welcome, it does not in itself answer the core question of what exactly constitutes ‘better’, and for whom, and how to manage inevitable conflicts and trade‐offs in society. These have long been the core concerns of welfare economics. Yet, in the 1980s and 1990s, debates on welfare economics seemed to have become marginalised. The articles in this Fiscal Studies symposium engage with the question of how to revive normative questions as a central issue in economic scholarship.
Behavioural welfare economics has lately been challenged on account of its use of the satisfaction of true preferences as a normative criterion. The critique contests what is taken to be an implicit ...assumption in the literature, namely that true preferences are context-independent. This assumption is considered not only unjustified in the behavioural welfare economics literature but unjustifiable - true preferences are argued to be, at least sometimes, context-dependent. This article explores the implications of this 'critique of the inner rational agent'. I argue that the critique does not support a wholesale shift away from the use of true preferences as an evaluative standard in normative economics; instead, the critique implies that behavioural welfare economists need to inquire into and establish the 'source' of particular context-dependent choices in individuals' decision-making. The source determines the permissibility of correcting individuals' context-dependent choices and can, in some situations, support decisive welfare judgements.
In The Community of Advantage, Robert Sugden advocates an opportunity-oriented framework for normative analysis, positions it a substitute for behavioral welfare economics, and criticizes the latter. ...This paper distills the logic underpinning the main approaches to behavioral welfare economics, addresses Sugden's criticisms, and identifies some limitations of his alternative approach.
The capability approach developed by Nobel Laureate Amartya Sen has become an important new paradigm in thinking about development. However, despite its theoretical and philosophical attractiveness, ...it has been less easy to measure or to translate into policy. This volume addresses these issues in the context of poverty and justice. Part I offers a set of conceptual essays that debate the strength of the often misunderstood individual focus of the capability approach. Part II investigates the techniques by which we can measure and compare capabilities, and how we can integrate them into poverty comparisons and policy advice. Finally, Part III looks at how we can apply the capability approach to different regions and contexts. Written by a team of international scholars, The Capability Approach is a valuable resource for researchers and graduate students concerned with the debate over the value of the capability approach and its potential applications.
Summary Maternal and child undernutrition is highly prevalent in low-income and middle-income countries, resulting in substantial increases in mortality and overall disease burden. In this paper, we ...present new analyses to estimate the effects of the risks related to measures of undernutrition, as well as to suboptimum breastfeeding practices on mortality and disease. We estimated that stunting, severe wasting, and intrauterine growth restriction together were responsible for 2·2 million deaths and 21% of disability-adjusted life-years (DALYs) for children younger than 5 years. Deficiencies of vitamin A and zinc were estimated to be responsible for 0·6 million and 0·4 million deaths, respectively, and a combined 9% of global childhood DALYs. Iron and iodine deficiencies resulted in few child deaths, and combined were responsible for about 0·2% of global childhood DALYs. Iron deficiency as a risk factor for maternal mortality added 115 000 deaths and 0·4% of global total DALYs. Suboptimum breastfeeding was estimated to be responsible for 1·4 million child deaths and 44 million DALYs (10% of DALYs in children younger than 5 years). In an analysis that accounted for co-exposure of these nutrition-related factors, they were together responsible for about 35% of child deaths and 11% of the total global disease burden. The high mortality and disease burden resulting from these nutrition-related factors make a compelling case for the urgent implementation of interventions to reduce their occurrence or ameliorate their consequences.
This article proposes a welfare criterion for economies in which agents have heterogeneously distorted beliefs. Instead of taking a stand on whose belief is correct, our criterion asserts that an ...allocation is belief-neutral efficient (inefficient) if it is efficient (inefficient) under any convex combination of agents’ beliefs. Although this criterion gives an incomplete ranking of social allocations, it can identify positive- and negative-sum speculation driven by conflicting beliefs in a broad range of economic environments.
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