Responsibility utility and the difference between preference and desirance: implications for welfare evaluation

Abstract

Actions can provide “responsibility utility” when they signal the actors’ identities or values to others or to themselves. This paper considers a novel implication of this responsibility utility for welfare analysis: fully informed incentive-compatible choice data can give a biased measure of the utility delivered by exogenously determined outcomes. A person’s choice of a policy outcome may be informed by responsibility utility that would be strictly absent if that same person were a passive recipient of that same policy outcome. We introduce the term “desirance” to describe a rank ordering over exogenously determined outcomes and present evidence that desirance captures the welfare consequences of exogenously determined outcomes more accurately than preference. We review literatures showing that preference is sensitive to contextual variations that influence responsibility utility and show experimentally that responsibility utility can explain discrepancies between welfare estimates derived from choice data and subjective well-being data. We close by discussing subjective well-being as a potential measure of desirance.