Logo Logo

Aggregate Risk and the Pareto Principle

Abstract

In the evaluation of public policies, a crucial distinction is between plans that involve purely idiosyncratic risk and policies that generate aggregate, correlated risk. While natural, this distinction is not captured by standard utilitarian aggregators. In this paper we revisit Harsanyi’s (1955) celebrated theory of preferences aggregation and develop a parsimonious generalization of utilitarianism. The theory we propose can capture sensitivity to aggregated risk, it is apt for studying large populations and is characterized by two simple axioms of preferences aggregation.

Type

Working Paper

Author(s)

Nabil Al-Najjar, Luciano Pomatto

Date Published

2018

Citations

Al-Najjar, Nabil, and Luciano Pomatto. 2018. Aggregate Risk and the Pareto Principle.

KELLOGG INSIGHT

Explore leading research and ideas

Find articles, podcast episodes, and videos that spark ideas in lifelong learners, and inspire those looking to advance in their careers.
learn more

COURSE CATALOG

Review Courses & Schedules

Access information about specific courses and their schedules by viewing the interactive course scheduler tool.
LEARN MORE

DEGREE PROGRAMS

Discover the path to your goals

Whether you choose our Full-Time, Part-Time or Executive MBA program, you’ll enjoy the same unparalleled education, exceptional faculty and distinctive culture.
learn more