Working Paper: NBER ID: w31456
Authors: Charles F. Manski
Abstract: Economists have long studied policy choice by a social planner who aims to maximize welfare in democracies or other political systems where, in some sense, welfare is intended to express the well-being of a society rather than the personal preferences of a dictator. The motivation for studying planning is most transparent when actual planners face specific decision problems. Welfare economics has also sought to shed light on noncooperative societal decision processes, where no actual planner exists. Researchers have generally assumed that the actual or hypothetical planner knows enough about the choice environment to be able to determine an optimal action. However, the consequences of decisions are often highly uncertain. Addressing the failure of research to come to grips with uncertainty has motivated my program of study of credible social planning under uncertainty. This paper describes the main themes and summarizes several applications. I first discuss practices that have promoted planning with incredible certitude, using specific cases to illustrate. I next describe and contrast the conceptions of uncertainty in consequentialist and axiomatic decision theory. I then summarize my studies of five problems of planning under uncertainty.
Keywords: No keywords provided
JEL Codes: H0; I31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Traditional welfare economics assumptions about planners' knowledge (D69) | Poor decision-making in social planning (D70) |
| Uncertainty in decision consequences (D80) | Poor decision-making in social planning (D70) |
| Lack of sufficient knowledge of welfare consequences (D69) | Ill-defined maximization of social welfare (D69) |
| Reliance on strong assumptions (C51) | Negative effects on policy outcomes (D78) |
| Acknowledging uncertainty in decision-making (D80) | Credible social planning (D71) |