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Module 1: Arrow's Theorem and Demand Curves

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Arrow'sTheorem and Demand Curves - Lesson Summary

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The key points from this module are: 
In biocentrism the biologic world is the centre of the value system, all living beings have intrinsic value, regardless of their instrumental value. This would mean that if you have a biocentric viewpoint of the world, you would try to not only preserve individuals, but you would also like to preserve all kinds of all the organisms. Instrumental value refers to the usefulness of an object or an individual or a being. Sustainability perspective initially was proposed by Leopold, way back in 1949, talks of the land ethic, the health of the ecosystem are of paramount importance. At an environmental policy being right, only if it preserves the integrity of an ecosystem and wrong if it does not. The Brundtland Commission defined sustainability as development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Anthropocentrism is a human-centric viewpoint where only human beings matter and the environment is only there for one purpose, to provide material gratification for humans. Only provides an instrumental value to the environment that means the environment is important only so far as it is useful to us. The utilitarianism is a variant of anthropocentrism that refers to the wellbeing that attained from the environment and could be materialistic, spiritual, instrumental or intrinsic. There are no restrictions on individual preferences. Every individual can decide how he or she will choose between all the different options and it is also the utility of future generations which is involved. Pareto Optimality is a situation where you cannot have an improvement where everyone benefits. There is no possible change where everyone benefits and everyone will be agreeable to it. It is possible to compensate and in the compensation at the result of that, every individual utility either increases or remains constant. Some of the individuals who had the utility increase more they transfer some resources, their utility, their part of that increase in utility shared with those who are losing out with the result that now there is unanimity. So, this is called Potential Pareto improvement. The Pareto Preference, the Hicks Kaldur compensation principle and Pareto compensation are three methods of choices in actual practice these are all conceptual constructs by which we understand how we are making the tradeoffs. The Arrow's Impossibility Theorem says that it is impossible to have a social choice which meets all the requirements of an ideal choice mechanism and concluded that there is no meaning relevant to welfare comparisons in the measurability of individual utility. This implies that there is no need theory of social decision making. An ideal social choice mechanism should have the following characteristics and the six characteristics. Completeness, unanimity, non-dictatorship, transitivity independence of irrelevant alternatives and universality. A good is excludable if it is feasible and practical to selectively allow consumers to consume the good. A good/bad is rival if one person's consumption of a unit of the good or bad diminishes the amount of the good or bad available for others to consume. The good, that is rival and excludable is called a pure private good. A good which are neither rival, non-excludable is pure public good.