DEFINITION of 'Social Choice Theory'

Social Choice Theory is an economic theory that considers whether a society can be ordered in a way that reflects individual preferences. The theory was developed by economist Kenneth Arrow and published in his book Social Choice and Individual Values in 1951. 

BREAKING DOWN 'Social Choice Theory'

The theory of social choice asks whether it is possible to find a rule that aggregates individual preferences, judgments, votes and decisions in a way that satisfies minimal criteria for what should be considered a good rule. Social Choice Theory considers all sorts of individual choices, not just political choices. To consider a political example, under a dictatorship, decisions about social choices and the ordering of society are made by a small group of people. In an open democratic society, each individual has an opinion about how society should best be ordered. Ordering society in a way that reflects these many and varied individual preferences is therefore difficult.

Arrow specifies five conditions that a society's choices must meet in order to reflect the choices of its individuals. These include Universality, Responsiveness, Independence of Irrelevant Alternatives, Non-imposition and Non-dictatorship. Arrow's Impossibility Theorem states that it is impossible to order society in a way that reflects individual preferences without violating one of the five conditions. 

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