Draft: 13/06/2011-1- © Sebastian Silva-Leander Revealed Meta-Preferences: Axiomatic Foundations of Normative Assessments in the Capability Approach

ABSTRACT: This paper explores the possibility of defining a non-utilitarian normative standard for assessments of welfare and deprivation. The paper contributes to this end in three ways. First, the paper formalises a key aspect of Prof. Sen’s critique of neoclassical welfare economics, regarding the assumption of consistent utility-maximisation in the revealed preference theory. Secondly, the paper explores alternative formulations of the axiom of revealed preferences that are consistent with Prof. Sen’s critique and proposes a set of intuitive assumptions to characterise the relation between observed choices and underlying preferences in the absence of consistent utility-maximisation. Finally, we use these to construct two alternative normative ranking rules that can be used in empirical applications of Prof. Sen’s so-called capability approach. Draft: 13/06/2011-2- © Sebastian Silva-Leander “It is a mistake to set up physics as a model and pattern for economic research. But those committed to this fallacy should have learned one thing at least: that no physicist ever believed that the clarification of some of the assumptions and conditions of physical theorems is outside the scope of physical research. " (Ludwig von Mises, 1949, p. 4) George Stigler described Adam Smith’s The Wealth of Nations as a “stupendous palace erected o