A Subjective Wellbeing Approach to Some Major Problems of Welfare Economics

Abstract

I outline an approach to applied welfare economics: 1. Grounded in the psychometrics of subjective well-being. 2. Focused on providing information about the effects of policy useful to discussion by the democratic public and decision-makers. I argue this ap-proach can help solve many of the traditional problems of welfare economics such as interpersonal comparison, cardinalisation, the proper role of values in welfare econom-ics and the question of where to draw information about an agent's preferences. Con-cerning the problem of interpersonal comparison, I argue that a moderate form of philo-sophical functionalism, combined with a belief that psychometrics does what it claims to do can resolve the problem. Concerning the problem of cardinalisation, I argue that several potentially viable strategies already exist for cardinalizing psychometrics and common claims regarding the dangers of treating psychometrics as already cardinal may be overstated. Concerning the problem of values in welfare economics I argue that providing information on the likely effects of policy on SWB metrics avoids both the problem of being morally and politically irrelevant by not saying anything of ethical or political significance and the problem of ethical sectarianism- adopting strong value premises that make one's work irrelevant or repugnant to those who do not share those premises. Regarding the problem of getting information about an agent's preferences, I argue that psychometrics are likely to be superior to revealed preference approaches because, among other issues revealed preference approaches are insensitive to the distinction between instrumental and intrinsic preferences. Finally, I conclude by consid-ering a variety of other issues- wireheading, arguments against weighted cost-benefit analysis and directions for future research.