Social Choice Theory

AAA

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.

INVESTOPEDIA EXPLAINS '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. Freudian Motivation Theory

    A sales theory which surposes that consumers choose whether or ...
  2. Leadership Grid

    A model of behavioral leadership developed in the 1950s by Robert ...
  3. Arrow's Impossibility Theorem

    A social-choice paradox illustrating the impossibility of having ...
  4. Pareto Efficiency

    An economic state where resources are allocated in the most efficient ...
  5. Tit For Tat

    A game-theory mechanism which is subject to a payoff matrix similar ...
  6. Diner's Dilemma

    A game-theory situation with several players. Similar to a prisoner's ...
RELATED FAQS
  1. Is finance an art or a science?

    The short answer to this question is "both". Finance, as a field of study and an area of business, definitely has strong ... Read Full Answer >>
  2. 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 Full Answer >>
  3. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  4. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  5. How does the role of Medicare/Medicaid affect the drugs sector in the U.S.?

    Medicare and Medicaid have enormous influence on the pharmaceutical, or drugs, sector in the United States. For instance, ... Read Full Answer >>
  6. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
Related Articles
  1. Economics

    The Austrian School Of Economics

    Investopedia explains: If you think economists are only concerned with numbers, check out the Austrian School, who are more like economic philosophers.
  2. Economics

    Adam Smith: The Father Of Economics

    This free thinker promoted free trade at a time when governments controlled most commercial interests.
  3. Economics

    Why Can't Economists Agree?

    There are many reasons why economists can be given the same data and come up with entirely different conclusions.
  4. Active Trading

    Modern Portfolio Theory: Why It's Still Hip

    See why investors today still follow this old set of principles that reduce risk and increase returns through diversification.
  5. Forex Education

    Elliott Wave Theory

    Acquaint yourself with the principle built on the discovery that stock markets did not behave in a chaotic manner.
  6. Economics

    Understanding the Product Life Cycle

    Product life cycle is the period of time during which a product is conceived and developed, brought to market and eventually removed from the market.
  7. Economics

    What Does Infrastructure Mean?

    Examples of infrastructure include mass transit, communication, sewage, water and electric systems, plus roads, bridges and tunnels.
  8. Economics

    What's a Centrally Planned Economy?

    A centrally planned economy is one where the government controls the country’s supply and demand of goods and services.
  9. Economics

    What are Barriers to Entry?

    A barrier to entry is any obstacle that restricts or impedes a company’s efforts to enter an industry.
  10. Economics

    Explaining Aggregate Supply

    Aggregate supply is the total supply of goods and services an economy produces in a given time period.

You May Also Like

Hot Definitions
  1. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  2. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  3. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  4. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  5. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  6. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!