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.

RELATED TERMS
  1. Welfare Economics

    A branch of economics that focuses on the optimal allocation ...
  2. Welfare Capitalism

    Definition of welfare capitalism.
  3. Biased Expectations Theory

    A theory that the future value of interest rates is equal to ...
  4. Revealed Preference

    An economic theory of consumption behavior which asserts that ...
  5. Aggregate Function

    A mathematical computation involving a set of values rather than ...
  6. Kenneth Arrow

    An American neoclassical economist who won the Nobel Memorial ...
Related Articles
  1. Investing

    7 Controversial Investing Theories

    We take a closer look at the theories that attempt to explain and influence the market.
  2. Investing

    When Socially Responsible Investing Hurts

    Socially responsible investing can make you feel good but it may not boost your returns.
  3. Retirement

    Americans Are Living Longer, but Social Security Is Not Catching Up

    Find out how Social Security really works, why the system is in trouble and whether retirees are simply living too long for Social Security to remain viable.
  4. Personal Finance

    Social Finance Careers: Creating A Better World

    A financial career can be used to do more than just bring in profits. Find out how to get a career with a more social objective.
  5. Retirement

    How to Fix an Error on Your Social Security Check

    For many seniors, social security benefits checks are their income stream which means the benefit has to be correct. If you spot an error, you can fix it.
  6. Retirement

    What Will Social Security Look Like When You Retire?

    Many workers are not confident that Social Security will be around during their retirement. Here's what you need to know about its future.
  7. Investing

    Modern Portfolio Theory vs. Behavioral Finance

    Modern portfolio theory and behavioral finance represent differing schools of thought that attempt to explain investor behavior. Perhaps the easiest way to think about their arguments and positions ...
  8. Investing

    Efficient Market Hypothesis

    An investment theory that states it is impossible to "beat the market".
RELATED FAQS
  1. Is Social Security considered to be welfare?

    Learn why Social Security is an entitlement, not welfare. Since 1940, Social Security has kept its promise to Americans who ... Read Answer >>
  2. What is the Social Security administration responsible for?

    Learn about the Social Security Administration's main responsibilities along with its history, structure and social safety ... Read Answer >>
  3. What's the difference between agency theory and stakeholder theory?

    Learn how agency theory and stakeholder theory are used in business to understand common business communication problems ... Read Answer >>
  4. What is the chaos theory?

    The chaos theory is a complicated and disputed mathematical theory that seeks to explain the effect of seemingly insignificant ... Read Answer >>
  5. Why is Game Theory useful in business?

    Game theory was once hailed as a revolutionary interdisciplinary phenomenon bringing together psychology, mathematics, philosophy ... Read Answer >>
Hot Definitions
  1. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center