Discussion Paper Series 2014-E-2

A Reformulation of Normative Economics for Models with Endogenous Preferences

Vipul Bhatt, Masao Ogaki, Yuichi Yaguchi

This paper proposes to balance considerations from welfarism and virtue ethics for normative analysis of economic models with endogenous preferences. Our framework introduces two concepts that are useful in evaluating alternative social states. First, we introduce the moral evaluation function (MEF), which is used to evaluate alternatives based on virtue ethics. Second, we introduce the social objective function (SOF), which gives weights to both the standard social welfare function (SWF) and the MEF. We illustrate our evaluation approach in the context of a model of intergenerational altruism with endogenous time preferences.

Keywords: Moral virtue ethics; Welfarism; Cultural transmission of preferences; Tough love

Views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Japan or Institute for Monetary and Economic Studies.

Copyright © 2014 Bank of Japan All Rights Reserved.

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