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VALUING PROCESSES

Published online by Cambridge University Press:  31 July 2007

MARTIN E. SANDBU
MARTIN E. SANDBU
Affiliation:
University of Pennsylvania
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Abstract

Conventional economic theory assumes that people care only about ultimate outcomes and are indifferent to the decision and allocation processes by which outcomes are brought about. Building on Sen (1997), I relax this assumption, and investigate the formal and philosophical issues that arise. I extend the formal apparatus of preference theory to analyse how processes may enter preferences, and investigate whether traditional invariance requirements like the Weak Axiom of Revealed Preference are still satisfied in this new setting. I show that it is, provided certain conditions of separability hold, and I discuss the plausibility of these conditions. Further, I argue that processes are often valued in a mode that diverges from the conventional modes of instrumental and intrinsic/independent valuation. I introduce the notion of dependent non-instrumental valuation, and show how processes could depend on their instrumental function for their value – making their value dependent – and yet derive their value from something else – making it non-instrumental. Dependent non-instrumental value, I argue, can be explained by symbolic and evidential relations between processes and outcomes.

Type
Essay
Information
Economics & Philosophy , Volume 23 , Issue 2 , July 2007 , pp. 205 - 235
Copyright
2007 Cambridge University Press

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Footnotes

This article is based on the third chapter of my Ph.D. dissertation (Sandbu 2003). I would like to thank Richard Tuck for many discussions over several years, which helped me develop and elaborate the ideas presented here. I am also very grateful to Amartya Sen, Nien-hê Hsieh, Luc Bovens, and Xaq Pitkow for their close readings of various versions of the paper and their incisive comments, questions, and suggestions. Further thanks go to Christopher Avery, Matthias Benz, Jerry Green, Waheed Hussain, David Laibson, Robert Sugden, Alan Strudler, Justin Wolfers, and seminar participants at Harvard University and the Wharton School of Business. Akshay Jashnani provided helpful research assistance. Most of the ideas in the present article were developed while I was the recipient of a doctoral grant from the Research Council of Norway, which I gratefully acknowledge.