Measurement in Economics

Measures of need-based justice that have been proposed lately rely on a single dimension of need that is taken into account. This is shown to be problematic since humans experience different kinds of need that appear to be incommensurable.

“You have an architect and a ditch-digger working together on a construction project. Who gets paid more, and why?” Does a tendency toward abstraction and quantification, a pretense of objectivity, obscure the character, situation and bias from which all economic and political theorems stem? Following the principle that arguments neither arise nor persist in a vacuum, that they live and die by their context and character, we can describe two sorts of response corresponding to two rather timeless worldviews, along with (...) their accompanying “mind-sets”. The degree to which these views indicate differing “kinds” in human nature, beyond which there can be no further reduction to common ground, whether conversely they simply reflect historical and economic circumstance, or to what extent they are both, will be left to the reader. One might discern in the sensibilities described some alignment along traditional epithets of “bourgeois” vs. “working class”, but this is not necessarily so. I will therefore avoid overwrought labels, but admit that such family resemblances speak to a longer historical view and a persistent problematic. (shrink)

Need considerations play an important role in empirically informed theories of distributive justice. We propose a concept of need-based justice that is related to social participation and provide an ethical measurement of need-based justice. The β-ε-index satisfies the need-principle, monotonicity, sensitivity, transfer and several »technical« axioms. A numerical example is given.

It is an open question whether well-being ought to primarily be understood as a temporal concept or whether it only makes sense to talk about a person’s well-being over their whole lifetime. In this article, I argue that how this principled philosophical disagreement is settled does not have substantive practical implications for well-being science and well-being policy. Trying to measure lifetime well-being directly is extremely challenging as well as unhelpful for guiding well-being public policy, while temporal well-being is both an (...) adequate indirect measure of lifetime well-being, and an adequate focus for the purposes of improving well-being through public policy. Consequently, even if what we ought to care about is lifetime well-being, we should use temporal measures of well-being and focus on temporal well-being policies. (shrink)

Philosophers of well-being have tended to adopt a foundationalist approach to the question of theory and measurement, according to which theories are conceptually prior to measures. By contrast, social scientists have tended to adopt operationalist commitments, according to which they develop and refine well-being measures independently of any philosophical foundation. Unfortunately, neither approach helps us overcome the problem of coordinating between how we characterize wellbeing and how we measure it. Instead, we should adopt a coherentist approach to well-being science.

There is a widely held view on measurement inferences, that goes back to Stevens’s ([1946]) theory of measurement scales and ‘permissible statistics’. This view defends the following prohibition: you should not make inferences from averages taken with ordinal scales (versus quantitative scales: interval or ratio). This prohibition is general—it applies to all ordinal scales—and it is sometimes endorsed without qualification. Adhering to it dramatically limits the research that the social and biomedical sciences can conduct. I provide a Bayesian analysis of (...) this inferential problem, determining when measurements from ordinal scales can be used to confirm hypotheses about relative group averages. The prohibition, I conclude, cannot be upheld, even in a qualified sense. The beliefs needed to make average comparisons are less demanding than those appropriate for quantitative scales. I illustrate with the alleged paradigm ordinal scale, Mohs’ scale of mineral hardness, arguing that the literature has mischaracterized it. (shrink)

This paper develops and explores a new framework for theorizing about the measurement and aggregation of well-being. It is a qualitative variation on the framework of social welfare functionals developed by Amartya Sen. In Sen’s framework, a social or overall betterness ordering is assigned to each profile of real-valued utility functions. In the qualitative framework developed here, numerical utilities are replaced by the properties they are supposed to represent. This makes it possible to characterize the measurability and interpersonal comparability of (...) well-being directly, without the use of invariance conditions, and to distinguish between real changes in well-being and merely representational changes in the unit of measurement. The qualitative framework is shown to have important implications for a range of issues in axiology and social choice theory, including the characterization of welfarism, axiomatic derivations of utilitarianism, the meaningfulness of prioritarianism, the informational requirements of variable-population ethics, the impossibility theorems of Arrow and others, and the metaphysics of value. (shrink)

This paper is about the role of interpersonal comparisons in Harsanyi's aggregation theorem. Harsanyi interpreted his theorem to show that a broadly utilitarian theory of distribution must be true even if there are no interpersonal comparisons of well-being. How is this possible? The orthodox view is that it is not. Some argue that the interpersonal comparability of well-being is hidden in Harsanyi's premises. Others argue that it is a surprising conclusion of Harsanyi's theorem, which is not presupposed by any one (...) of the premises. I argue instead that Harsanyi was right: his theorem and its weighted-utilitarian conclusion do not require interpersonal comparisons of well-being. The key to making sense of this possibility is to treat Harsanyi's weights as dimensional constants rather than dimensionless numbers. (shrink)

Matthew Adler's Measuring Social Welfare is an introduction to the social welfare function (SWF) methodology. This essay questions some ideas at the core of the SWF methodology having to do with the relation between the SWF and the measure of well-being. The facts about individual well-being do not single out a particular scale on which well-being must be measured. As with physical quantities, there are multiple scales that can be used to represent the same information about well-being; no one scale (...) is special. Like physical laws, the SWF and its ranking of distributions cannot depend on exactly which of these scales we use. Adler and other theorists in the SWF tradition have used this idea to derive highly restrictive constraints on the shape of the SWF. These constraints rule out seemingly plausible views about distributive justice and population ethics. I argue, however, that these constraints stem from a simple but instructive mistake. The SWF should not be applied to vectors of numbers such as 1 and 2, but rather to vectors of dimensioned quantities such as 1 util and 2 utils. This seemingly pedantic suggestion turns out to have far-reaching consequences. Unlike the orthodox SWF approach, treating welfare levels as dimensioned quantities lets us distinguish between real changes in well-being and mere changes in the unit of measurement. It does this without making the SWF depend on the scale on which welfare is measured, and in a way that avoids the restrictive constraints on the shape of the SWF. (shrink)

Behavioural economics has taught us that human agents don't always display consistent, context-independent and stable preferences in their choice behaviour. Can we nevertheless do welfare economics...

The observation that concepts used by social scientists are often problematic is not new; they have been described as Ballung concepts, cluster concepts, essentially contested, and reflexive; however, the need to work with these concepts remains. This article addresses the problem of variable choice in the social sciences by exploring and extending Woodward’s recommendations. This article demonstrates why Woodward’s criteria are difficult to apply in the social sciences and proposes an alternative, but complementary, framework for assessing variables.

Generating an account that can sidestep the disagreement among substantive theories of well-being, while at the same time still providing useful guidance for well-being public policy, would be a significant achievement. Unfortunately, the various attempts to remain agnostic regarding what constitutes well-being fail to either be an account of well-being, provide useful guidance for well-being policy, or avoid relying on a substantive well-being theory. There are no theory-free lunches in well-being policy. Instead, I propose an intermediate account, according to which (...) well-being is constituted by endorsed veridical experiences. This account refers back to theories of well-being but does so as agnostically as possible. An intermediate account of well-being is meant as a policy guiding compromise between the different theories of well-being that make claims regarding what constitutes well-being. An intermediate account does as well as can be hoped for in providing a basis for well-being policy. (shrink)

Volume 26, Issue 4, December 2019, Page 380-384.

Many economic measures are structured to reflect ethical values. I describe three attitudes towards this: maximalism, according to which we should aim to build all relevant values into measures; minimalism, according to which we should aim to keep values out of measures; and an intermediate view. I argue the intermediate view is likely correct, but existing versions are inadequate. In particular, economists have strong reason to structure measures to reflect fixed, as opposed to user-assessable, values. This implies that, despite disagreement (...) about precisely how to do so, economists should standardly adjust QALYs and DALYs to reflect egalitarian values. (shrink)

The notion of “worth” and “value” throughout human history was only partly dependent on economic reasons. Arrangements about what is considered an equivalent value/measure of wealth are the result of complex interdependencies of economic, social and cultural factors. For thousands of years people have used precious metals as universal equivalent and main measure of wealth; full-value metal money was, in fact, only reinforced by the authority of state (ruler) evidence of presence certain amount of precious metal. The rejection of valuable (...) coins and the provision of banknotes with precious metals (that is, the rejection of the gold and the silver standard) led to the fact that the circulating money signs in the society ceased to denote a concrete value, becoming an abstraction, putting the population in dependence on state’s monetary policy and financial stability of national economy. Bitcoin and its numerous alternatives arose as a response to the challenge of informatization, globalization and individualization of economic activity. This is an attempt to escape from control of state structures that are inclined to abuse their right to issue banknotes and to voluntaristic methods of managing the economy. To some extent, the cryptocurrencies reflect the nostalgia of market participants on the gold standard, which is surprisingly transformed into a complete denial of the materiality (including the metal substance) of money. This situation stimulates the search for new models for designation the equivalent value in the information society. (shrink)

Summary measures of health, such as the quality-adjusted life year and disability-adjusted life year, have long been known to incorporate a number of value choices. In this paper, though, I show that the value choices in the construction of such measures extend far beyond what is generally recognized. In showing this, I hope both to improve the understanding of those measures by epidemiologists, health economists and policy-makers, and also to contribute to the general debate about the extent to which such (...) measures should be adjusted to reflect ethical values. (shrink)

We reexamine some of the classic problems connected with the use of cardinal utility functions in decision theory, and discuss Patrick Suppes's contributions to this field in light of a reinterpretation we propose for these problems. We analytically decompose the doctrine of ordinalism, which only accepts ordinal utility functions, and distinguish between several doctrines of cardinalism, depending on what components of ordinalism they specifically reject. We identify Suppes's doctrine with the major deviation from ordinalism that conceives of utility functions as (...) representing preference differences, while being non- etheless empirically related to choices. We highlight the originality, promises and limits of this choice-based cardinalism. (shrink)

Policy-makers sometimes aim to improve well-being as a policy goal, but to do this they need some way to measure well-being. Instead of relying on potentially problematic theories of well-being to justify their choice of well-being measure, Daniel Hausman proposes that policy-makers can sometimes rely on preference-based measures as evidence for well-being. I claim that Hausman’s evidential account does not justify the use of any one measure more than it justifies the use of any other measure. This leaves us at (...) a loss as to which policy should be chosen in the non-trivial cases for which there is substantial disagreement between the different measures in their assessment of policy. (shrink)

This article illustrates how axiomatic social choice theory can be used in the evaluation of measures of group fitness for a biological hierarchy, thereby contributing to the dialogue between the philosophy of biology and social choice theory. It provides an axiomatic characterization of the ordering underlying the MichodSolariNedelcu index of group fitness for a multicellular organism. The MVSHN index has been used to analyse the germ-soma specialization and the fitness decoupling between the cell and organism levels that takes place during (...) the evolutionary transition to multicellularity. It is argued that some of the axioms satisfied by the MVSHN group fitness ordering are not appropriate for all stages in this transition. (shrink)

In traditional decision theory, utility is regarded as a mathematical representation of preferences to be inferred from agents hedonic experiences. Some go as far as to contend that utility is literally computed by specific neural areas and urge economists to complement or substitute their notion of utility with some neuro-psychological construct. In this paper, I distinguish three notions of utility that are frequently mentioned in debates about decision theory and examine some critical issues regarding their definition and measurability. Moreover, I (...) provide various empirical and conceptual reasons to doubt that economists should base decision theoretic analyses on some neuro-psychological notion of utility. (shrink)

This article explains some moral dimensions of a transnational feminist research project designed to provide a better standard or metric for measuring poverty across the world. The author is an investigator on this project. Poverty metrics incorporate moral judgments about what is necessary for a decent life, so justifying metrics requires moral argumentation. The article clarifies the moral aspects of poverty valuation, indicates some moral flaws in existing global poverty metrics, and outlines some conditions for a better global metric. It (...) then explains the methodology used in our project, providing its moral rationale and discussing some remaining moral concerns. (shrink)

The World Development Report 2012: Gender Equality and Development has recently confirmed the widely held belief that women across the world tend to perform different work from men who otherwise are situated similarly. Women also work longer hours than similarly situated men. In analyzing the justice of these gendered disparities in time-use, WDR 2012 uses a moral framework that is largely distributive. Although this framework illuminates some aspects of the injustice of the situation, I contend that it obscures other crucial (...) aspects, making the analysis inadequate overall. I argue that a more comprehensive and illuminating moral understanding can be reached by analyzing these time-use disparities in terms of global gendered exploitation. This alternative framework also better enables identifying those politically responsible for the injustice and points toward a vision of global gender justice that is morally more plausible. (shrink)

This article reflects critically on the methodology of one feminist research project which is ongoing as we write. The project is titled “Assessing Development: Designing Better Indices of Poverty and Gender Equity” and its aim is to develop a better standard or metric for measuring poverty across the world. The authors of this article are among several philosophers on the research team, which also includes scholars from the disciplines of anthropology, sociology and economics. This article begin by explaining why a (...) new and better poverty metric is needed and why developing such a metric requires an alternative methodological approach inspired by feminism. It then describes our methodological goals and strategies and summarizes our research findings, showing how they diverge from standard assessments as a result the feminist methods we used. We conclude with some methodological lessons we learned and questions that we think remain to be addressed. (shrink)

The thesis studies the problem of measuring freedom of choice. It analyzes the concept of freedom of choice, discusses conditions that a measure should satisfy, and introduces a new class of measures that uniquely satisfy ten proposed conditions.

During the last two centuries, the way economic science is done has changed radically: it has become a social science based on mathematical models in place of words. This book describes and analyses that change - both historically and philosophically - using a series of case studies to illuminate the nature and the implications of these changes. It is not a technical book; it is written for the intelligent person who wants to understand how economics works from the inside out. (...) This book will be of interest to economists and science studies scholars. But it also aims at a wider readership in the public intellectual sphere, building on the current interest in all things economic and on the recent failure of the so-called economic model, which has shaped our beliefs and the world we live in. (shrink)

The financial crash of 2008 following the selling of fictitious derivatives was a crisis of both rationality and values whose aftermath has thrown the legitimation of deregulated markets, and governments, into question. This paper critiques the Becker metaphor of human capital and submits that human value is central to and the fulcrum of both economic and social values. It illustrates that Hume and Adam Smith directly countered the Hobbesian hypothesis that human nature is based only on self-interest, distinguishes market values (...) from social values, explicit from implicit values and parallels Sen in adopting an ordinal ranking of what people value rather than a search for cardinality. It draws on cognitive psychology, neural research, revealed preference theory and a principle of implicit verification. It also outlines implications for what Adam Smith centrally valued as concern for the welfare of the whole of society. (shrink)

This essay presents a new measure of opportunity, understood as the freedom to choose whatever one may reasonably prefer to choose.

This article develops a new measure of freedom of choice based on the proposal that a set offers more freedom of choice than another if, and only if, the expected degree of dissimilarity between a random alternative from the set of possible alternatives and the most similar offered alternative in the set is smaller. Furthermore, a version of this measure is developed, which is able to take into account the values of the possible options.

We would like to thank Ian Carter and Matthew Kramer for their challenging reply to our recent article. Dowding and van Hees is one of a series of articles in which we try to address measurement issues with regard to individual freedom. Our aim is to provide a conception of freedom that will eventually yield a way of measuring the relative freedom of groups of people within a society and a relative measure of freedom across societies. In doing so, we (...) draw upon the important work of Carter and Kramer, but as should be clear, we also depart from it in several respects. (shrink)

Social thinkers frequently remind us that people differ on what constitutes personal well-being, but that even when they don't differ, they disagree over the extent to which one person's well-being can be permitted to be traded off against another's. They tell us that political differences are to be traced to differences in people's conceptions of personal and social well-being. We are given to understand, in other words, that people's ethics differ.

The incomparability of alternatives is thought to pose a problem for justified choice, particularly for proponents of comparativism better than,worse than,equally good,roughly equalon a par. namely, rejection of the transitivity of the relation In this paper, I argue that proponents of comparativism need not incur this cost. I defend the possibility of justified choice between incomparable alternatives on grounds that comparativists can accept. The possibility of incomparability has been met with resistance, in part because of the intuitive appeal of comparativism. (...) By defending the possibility of justified choice between incomparable alternatives on grounds that comparativists can accept, this paper supports further inquiry into the subject of incomparability. (shrink)

Numerous instruments have been developed to elicit numerical values that represent the strength of preference for different health states. However, relatively few studies have attempted to analyse the reasoning processes that people employ when they are asked to answer questions based on these elicitation methods. The lottery equivalents method is a preference elicitation instrument that has recently received some attention in the literature. This study attempts a qualitative analysis of the use of this instrument on a group of 25 relatively (...) highly educated respondents. For each of three health states considered in the study, a substantial number of respondents refused to trade the chance of survival for a possible improvement in the health state. Therefore, many respondents violated an assumption that is necessary for the lottery equivalents instrument to generate cardinal health state values. These findings place a question mark against the usefulness of the lottery equivalents method, and add weight to the suspicion that ‘preferences’ are constructed according to how questions are framed. (Published Online July 31 2007). (shrink)

One response to Derek Parfit's invokes the relation of . Since parity is a form of in John Broome's terms, three doubts which Broome raises about accounts involving incommensurateness in Weighing Lives pose a challenge for this response. I discuss two of these. They emerge from a discussion of various intuitions about . I argue that an account based on parity may be no less consistent with Broome's intuitions than is his own vagueness view.

Conventional economic theory assumes that people care only about ultimate outcomes and are indifferent to the decision and allocation processes by which outcomes are brought about. Building on Sen (1997), I relax this assumption, and investigate the formal and philosophical issues that arise. I extend the formal apparatus of preference theory to analyse how processes may enter preferences, and investigate whether traditional invariance requirements like the Weak Axiom of Revealed Preference are still satisfied in this new setting. I show that (...) it is, provided certain conditions of separability hold, and I discuss the plausibility of these conditions. Further, I argue that processes are often valued in a mode that diverges from the conventional modes of instrumental and intrinsic/independent valuation. I introduce the notion of dependent non-instrumental valuation, and show how processes could depend on their instrumental function for their value – making their value dependent – and yet derive their value from something else – making it non-instrumental. Dependent non-instrumental value, I argue, can be explained by symbolic and evidential relations between processes and outcomes. (Published Online July 31 2007) Footnotes1 This article is based on the third chapter of my Ph.D. dissertation (Sandbu 2003). I would like to thank Richard Tuck for many discussions over several years, which helped me develop and elaborate the ideas presented here. I am also very grateful to Amartya Sen, Nien-hê Hsieh, Luc Bovens, and Xaq Pitkow for their close readings of various versions of the paper and their incisive comments, questions, and suggestions. Further thanks go to Christopher Avery, Matthias Benz, Jerry Green, Waheed Hussain, David Laibson, Robert Sugden, Alan Strudler, Justin Wolfers, and seminar participants at Harvard University and the Wharton School of Business. Akshay Jashnani provided helpful research assistance. Most of the ideas in the present article were developed while I was the recipient of a doctoral grant from the Research Council of Norway, which I gratefully acknowledge. (shrink)

This paper is about the measurement of specific freedoms freedom functionbeing free to performconditional probability of success.negative freedom is membership of powerful coalitions.”.

The question of when people may impose risks on each other is of fundamental moral importance. Forms of “quantified risk assessment,” especially risk cost-benefit analysis, provide one powerful approach to providing a systematic answer. It is also well known that such techniques can show that existing resources could be used more effectively to reduce risk overall. Thus it is often argued that some current practices are irrational. On the other hand critics of quantified risk assessment argue that it cannot adequately (...) capture all relevant features, such as “societal concern” and so should be abandoned. In this paper I argue that current forms of quantified risk assessment are inadequate, and in themselves, therefore, insufficient to demonstrate that current practices are irrational. In particular, I will argue that insufficient attention has been given to the cause of a hazard, which needs to be treated as a primary variable in its own right. However rather than reject quantified risk assessment I wish to supplement it by proposing a framework to make explicit the role causation plays in the understanding of risk, and how it interacts with factors which influence perception of risks and other attitudes to risk control. Once an improved description of risk perception is available it will become possible to have a more informed debate about the normative question: how safety should be regulated. (shrink)

This paper examines how people assess inequality of income distribution and how inequality could be measured. We start from the philosophical analysis of Temkin, who distinguishes nine plausible aspects of inequality. His approach is based on the concept of ‘complaints’ or distances between incomes. We examine the Temkin approach by means of the questionnaire-experimental method pioneered by Amiel and Cowell to find out whether the aspects of equality have any plausibility for student respondents and, if so, whether there are aspects (...) which are more appealing than others. Both the numerical and verbal responses show that a considerable majority of the respondents might be influenced by the intuitions included in the combination of the Weighted Additive Principle and the Average view of complaints. The questionnaire results also shed some empirical light on the acceptance of the Transfer Principle and the attitudes towards the Sequence. Footnotes I would like to thank Erik Schokkaert, Frank Cowell, and Liema Davidovitz for various suggestions which have led to improvements in this paper. I am very grateful for helpful comments from seminar participants and an anonymous referee. I remain responsible for any remaining error. This paper was written while the author enjoyed the hospitality of Sticerd, LSE, London and he acknowledges the financial support provided by the Training and Mobility of Researchers Program of the European Communities, grant #ERBFMRXCT980248. (shrink)

James Griffin (1986, 1997, 2000) and Ruth Chang (1997) have argued that alternatives (and values) can be comparable when it is neither true that one is better than the other, nor true that they are exactly equal in value. The relation which holds between them has gone under various names: the alternatives are (Griffin) or (Chang). In this paper, I give a formal analysis of this relation. This analysis allows us to distinguish between two slightly different notions of . It (...) is argued that the distinction between these notions is important for discussions of rationality, as is the distinction between or and incomparability. (shrink)

This note suggests that the exercise of measuring poverty in a society is greatly aided by clarity on precisely what one means by “the extent of poverty”. The latter concept may refer to the extent of poverty normalized for population size, or to the extent of poverty not so normalized. Absence of clarity on this distinction – which is both simple and non-trivial – could lead to rather straightforward problems of coherence and consistency in the measurement of poverty.

The notion of ‘revealed preference’ is unclear and should be abandoned. Defenders of the theory of revealed preference have misinterpreted legitimate concerns about the testability of economics as the demand that economists eschew reference to (unobservable) subjective states. As attempts to apply revealed-preference theory to game theory illustrate with particular vividness, this demand is mistaken.

review of Ruth Chang's collection in which I argue that the apparent agreements between the authors disguise underlying important differences.

The concept of well-being is central to the subject matter of moral philosophy as well as economics. According to some moral theorists morality is about the maximization of social well-being. According to others, notably John Rawls we ought to give particular priority to the worst off members in society. Both these and other moral positions, whatever the priority they attach to different members of society in arriving at moral judgements, require an account of well-being or advantage. The concern with well-being (...) is thus of foundational importance in moral philosophy, even if well-being is not thought of as all that matters. Furthermore, those who want to distinguish ‘morality’ from ‘self-interest’ must furnish us with an account of human interests, so that we can distinguish the moral realm from that of self-interest or prudence. The concerns of moral philosophers, here, clearly overlap with those of economists. Economists are much concerned with questions of how well people are doing, with their ‘standard of living’ or ‘quality of life’. However, there are very different ways of thinking about each of these ideas. Indeed, we need to discriminate between different views of the quality of life and to decide which is the most appropriate for the purposes of moral theory and the normative parts of economics. (shrink)

review of two similar collections on well-being.