Answer to Question #208890 in Microeconomics for Himanshu Negi

Question

Is there a ideal way of aggregating individual preferences into social preferences. Explain using Arrow impossibility theorem. Also give the various voting options with examples.

Answer 1

Solution:

No, there is no ideal way of aggregating individual preferences into social preferences.

According to Arrow's impossibility theorem, there is no method that exists of aggregating individual preferences into social preferences that can concurrently satisfy Arrow’s four minimal conditions, which are Universal admissibility, independence from immaterial options, Monotonicity, and Non-dictatorship.

The issue was examined meticulously by Kenneth Arrow by identifying several requirements that should be fulfilled by an acceptable rule for aggregating social preferences from individual preferences. Unfortunately, he was able to prove mathematically that there is no method for aggregating social preferences from individual preferences. Simply put, there is no single rule, majority voting or else, for determining social preferences from individual preferences.

 

The various voting alternatives include plurality rule, the Borda count, singular transferable vote, instant runoff, and approval voting. Examples include quadratic voting, majority rule, ranked voting, unanimity rule, run-offs, and voting by grading.