Welfare economics, risk and uncertainty

Social decisions in risky contexts raise a number of difficult questions, such as: (1) Should social decisions be more or less risk averse than the average person? (2) Should we try to avoid large catastrophes more than frequent but limited harms with similar expected impact? (3) Should social decisions be ambiguity averse or stick to the expected utility canon? This paper reviews the welfare economics of risk and uncertainty and examines possible answers to these questions, based on the pros and cons of utilitarianism, ex ante egalitarianism and ex post egalitarianism.