The assessment of situations with risk is one of the most fascinating (open) questions in welfare economics.

Consider two identical individuals A and B. Each policy gives a state-specific income bonus.
How would you rank the following 3 policies? #econtwitter 1/4

Policy I gives +4 for sure to A, but nothing to B.

Policy II gives A and B the same chance at the bonus, but creates inequality for sure.

Policy III gives A and B the same chance and creates no inequality, but imposes aggregate risk.

2/4

On the claimed superiority of I over II, see Diamond (1967, JPE, 2 pages!).

On the claimed superiority of III over II, see Broome (1984).

On the inconsistency of these views for rational and Paretian #welfarecriteria, see @mfleurbaey (2010, JPE).

So, the winner is?
3/4

NONE!

Economists rely almost exclusively on expected utilitarianism, which (under very mild assumptions) rank these 3 policies equally.

With the incoming 2021, I wish more discussion about the normative views we impose (without warning) when making policy recommendations! 4/4