DEFINITION of 'Social Choice Theory'
Individual preferences are aggregated to produce a social welfare function - essentially a preference ranking of the scenarios that are possible to society. Social choice theory is the philosophical and mathematical study of the type of conclusions that can determined through various aggregation methods.
BREAKING DOWN 'Social Choice Theory'
Using different metric such as interests, values and welfare, social choice theory aims to determine the optimal rules of structuring a fair voting framework. Social choice theory is a growing discipline started by Kenth Arrow who originated the study following his introduction of the impossibility theorem in 1951. This theory is applicable to group decision making, negotiations and other economic processes.