Behavioral economics has shaken the view that individuals have well-defined, consistent and stable preferences. This raises a challenge for welfare economics, which takes as a key postulate that individual preferences should be respected. This paper scrutinizes the challenge and argues, in agreement with Bernheim (2009) and Bernheim and Rangel (2009) that behavioral economics is compatible with consistency of partial preferences. While Bernheim and Rangel have focused on how to incorporate insights from behavioral economics into traditional concepts of welfare economics (Pareto optimality, compensation tests), we explore how the approach can be extended to deal with distributive issues. This paper revisits some key results of the theory in a framework with partial preferences and shows how one can derive partial orderings of individual and social situations.
D60: Welfare Economics: General
D71: Social Choice; Clubs; Committees; Associations