Social Planning with Partial Knowledge of Social Interactions

In his article, Charles F. Manski (Manski [2009]) elaborates on a topic that is familiar to economists, namely the normative question concerning which policy a social planner should implement to maximize welfare. Suppose a benevolent planner has a set of available policies 7' of which he can implement a particular policy t. Each policy affects individual outcomes for the members of society. The effectiveness of policies, the treatment response, is therefore characterized by a mapping of policies t e Τ into outcomes y(t) e Y for the different members j of the population (or the society at large), yjs(·): Τ -» Y. The treatment response can, in general, differ across the members of the population, and can also depend on the particular state of the world, s e S. Given a measure of welfare, such as a utilitarian welfare function, the planner can evaluate the effect of a policy on the population at large. Of course, in this canonical model the planner should choose the policy that maximizes social welfare and that implements the first-best allocation under the given environment.