Upcoming Seminars

Host: Marcus Pivato

Abstract. When aggregating Subjective Expected Utility preferences, an impossibility result is derived from the Pareto principle unless the individuals have a common belief. This paper examines the source of this impossibility in more detail by considering the aggregation of a general class of incomplete preferences that can represent gradual ambiguity perceptions. Our result shows that the planner cannot avoid ignoring some individuals unless there is a probability distribution that all individuals unanimously think to be most plausible. That is, even if the individuals have similar ambiguity perceptions, the impossibility holds as long as some individual's most plausible belief is slightly different from others. 

Host:  Marcus Pivato

Abstract.  This paper analyzes a society composed of individuals who have diverse sets of beliefs (or models) and diverse tastes (or utility functions). It characterizes the model selection process of a social planner who wishes to aggregate individuals' beliefs and tastes but is concerned that their beliefs are misspecified (or distorted). A novel impossibility result emerges: a utilitarian social planner who seeks robustness to misspecification never aggregates individuals' beliefs but instead behaves systematically as a dictator by selecting a single individual's belief. This tension between robustness and aggregation exists because aggregation yields policy-contingent beliefs, which are very sensitive to policy outcomes. Restoring possibility of belief aggregation requires individuals to have heterogeneous tastes and some common beliefs. This analysis reveals that misspecification has significant economic implications for welfare aggregation. These implications are illustrated in treatment choice, asset pricing, and dynamic macroeconomics.