Quantifying Inefficiency
Abstract
We axiomatically define a cardinal social inefficiency function, which, given a set of alternatives and individuals' vNM preferences over the alternatives, assigns a unique number -- the social inefficiency -- to each alternative. These numbers -- and not only their order -- are uniquely defined by our axioms despite no exogenously given interpersonal comparison, outside option, or disagreement point. We interpret these numbers as per-capita losses in endogenously normalized utility. We apply our social inefficiency function to a setting in which interpersonal comparison is notoriously hard to justify -- object allocation without money -- leveraging techniques from computer science to prove an approximate-efficiency result for the Random Serial Dictatorship mechanism.
Cite
@article{arxiv.2412.11984,
title = {Quantifying Inefficiency},
author = {Yannai A. Gonczarowski and Ella Segev},
journal= {arXiv preprint arXiv:2412.11984},
year = {2026}
}