This paper critically examines the various approaches to the measurement of individual well-being and social welfare that have been considered for the construction of alternatives to GDP. Special attention is devoted to recent developments in the analysis of sustainability, in the study of happiness, in the theory of social choice and fair allocation, and in the capability approach. It is suggested in the conclusion that, although convergence toward a consensual approach is not impossible, for the moment not one but three alternatives to GDP are worth developing.

This paper reexamines the welfare economics of risk. It singles out a class of criteria, the “expected equally distributed equivalent,” as the unique class that avoids serious drawbacks of existing approaches. Such criteria behave like ex post criteria when the final statistical distribution of well-being is known ex ante and like ex ante criteria when risk generates no inequality. The paper also provides a new result on the tension between inequality aversion and respect of individual ex ante preferences, in the vein of Harsanyi’s aggregation theorem.

The achievements and limitations of the classical theory of optimal labor-income taxation based on social welfare functions are now well known. Even though utilitarianism still dominates public economics, recent interest has arisen for broadening the normative approach and making room for fairness principles such as desert or responsibility. Fairness principles sometimes provide immediate recommendations about the relative weights to assign to various income ranges, but in general require a careful choice of utility representations embodying the relevant interpersonal comparisons. The main message of this paper is that the traditional tool of welfare economics, the social welfare function framework, is flexible enough to incorporate many approaches, from egalitarianism to libertarianism.

In a model where agents have unequal skills and heterogeneous preferences over consumption and leisure, we look for the optimal tax on the basis of efficiency and fairness principles and under incentive-compatibility constraints. The fairness principles considered here are: (1) a weak version of the Pigou-Dalton transfer principle; (2) a condition precluding redistribution when all agents have the same skills. With such principles we construct and justify specific social preferences and derive a simple criterion for the evaluation of income tax schedules. Namely, the lower the greatest average tax rate over the range of low incomes, the better. We show that, as a consequence, the optimal tax should give the greatest subsidies to the working poor (the agents having the lowest skill and choosing the largest labour time).

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The stakeholder (or responsible) firm maximizes the (weighted or unweighted) sum of the surpluses of its customers and suppliers (including workers). Although this objective is hard to empirically measure, it can be pursued by simple management rules that rely on constrained profit maximization. Unconstrained profit maximization gives a competitive edge to ordinary firms, but stakeholder firms are better for social welfare and internalize several important effects of their activities on society. Long-term entry decisions should rely on profit modified by Pigouvian pricing of externalities, and this result provides a novel justification for the polluter-pays principle.