INTRODUCTION

The ultimate objective of any approach to welfare economics is to provide criteria for the evaluation of social policies. In this chapter, we show how the social ordering functions axiomatized in the previous chapter engender such criteria.

After a policymaker has chosen the social ordering function that captures the policymaker's her ethical preferences, he or she typically faces information constraints that prevent him or her from being able to implement the allocations that are optimal according to the chosen social ordering function. The information constraints may be of different sorts, and we show here how the social ordering functions we have defined adjust to these different informational structures.

We study two informational structures. In some applications, we assume that labor time and earnings are observable, but skills are not. Agents may then choose to work at a lower wage rate than their skill warrants, if it is in their interest to do so. In other applications, we assume that labor time is no longer observable, and only earnings are. Under either set of assumptions, the policymaker must identify the optimal allocation among the ones that are compatible with the agents' incentives to hide their private information.

Our social ordering function approach turns out to accommodate these different structures easily. This comes from two central properties, on which we have already insisted. The first property is that the social ordering functions that satisfy the axioms we impose are of the leximin type.