Answer 3 of the following 4 questions. No answer should exceed 450 words.
1. What is utility and why, in assessing social and economic policy, do we need a conception of value that transcends wealth and income measured in dollars and cents? Should our conception of utility, viewed as something to be maximized, include everything individuals value, or should some things we value be excluded, If some should be excluded, which should be excluded and why?
2. What is the relationship between individual utility and social utility, and what role do they play in the traditional invisible-hand argument in favor of free markets within a legal framework banning monopolies, prohibiting fraud, penalizing breach of contract? What is the attraction of the argument and what are the most significant ways in which it is limited? Is there any reason to believe that its effectiveness today may be diminished or increased when compared with its effectiveness in 1776, when The Wealth of Nations appeared?
3. How does Frank Ramsey conceive of individual, agent-relative utilities and how does he assign numerical values to such utilities to individual? How, given an assignment of utilities, are subjective probabilities determined?
4. What are the problems with meaningfully aggregating individual utilities to arrive at total social utility at a time, or average utility for single individuals over time? Can anything be done to mitigate those problems, e.g. by limiting the utilities under consideration? What other factors, if any, beyond assessments of utility of one kind or another should be included in assessments of social policy?
Attached are in class handouts