(Friday, 26th May 2017)
Title : Collective choices and the market
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The theory of social choice usually deals with cases where the parameters of the collective choice are exogenous: 1/ the set of alternatives from which to choose, 2/ the agents participating in the collective choice, and 3/ the preferences of the agents over the alternatives are all given and fixed. But there are cases where these parameters are endogenously determined by some upstream mechanism. Consider for example a publicly traded firm governed to the best interest of its shareholders: the set of production plans, the shareholders, and their preferences over production plans are potentially all determined by trading. Hence the joint operation of a (decentralized) market mechanism and a (centralized) decision making mechanism. The lecture will address the question of the interplay between these two mechanisms: Do they help each other’s functioning? Are they efficient? How do they shape individual preferences? The lecture will draw from elementary notions of the economics of general equilibrium, the politics of social choice, and the sociology of preference formation on networks to shed light on a long standing puzzle: Why so much consensus?