Social Evaluation under Risk and Uncertainty

Abstract

This chapter examines the problem of evaluating policies with either risky or uncertain consequences. Under risk, the probabilities are known and agreed, whereas under uncertainty, probabilities are subjective and subject to disagreement. In the case of risk, Harsanyi’s Social Aggregation Theorem derives a representation of social utility as a weighted sum of individual utilities. But when there is uncertainty, two different and conflicting evaluation criteria, that is, ex ante and ex post, become available. The chapter explores this problem and sketches solutions. Similarly, when equality becomes the guiding question, there is a tension between ex ante and ex post evaluations, each leading to a conceptual loss, and the chapter explores solutions given to this further problem. It also covers Harsanyi’s Impartial Observer Theorem and its recent developments, and discusses the question raised by Sen of whether the weighted sum of individual utilities obtained by Harsanyi makes genuine utilitarian sense.

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