Browse by subject:
Applied and bridge studies study record
Hollow Win theory & mechanisms

Is System Welfare Circular? Diagnosis, Metric, and the Independence of the Welfare Estimand

STATUS · Manuscript in progressSSRN · Not yet posted
Open teaching deckSSRN — not yet postedPublication record
MECHANISM
Identify the incentive structure and the condition that would falsify the claim.
RULE CHANGE
Read the intervention only after the paper shows how the current payoff space fails to support system welfare.
READER USE
Use the summary to see where private gain creates system exposure, then check the study record.
Reading βW
βW means annual system-welfare loss divided by annual industry revenue Π. Revenue is the denominator, never profit, earnings, or net income; ΔW and Π must use the same domain, same time period, and same activity boundary. See the βW methodology manual.
Contribution — what this adds to the conversation
The circularity objection to the SAPM framework is resolved by distinguishing sign from magnitude and by showing that ΔW and Π are estimated from independent data sources. Proposition 1 (Estimand Independence) proves that ΔW and Π are drawn from disjoint data-generating processes. The falsification condition is that harm channels would need to be revenue-determined for βW to be circular; this is empirically false. Cross-domain regression of ΔW on revenue yields R²=0.12, indicating that revenue explains little of the variation in harm.
WHAT'S NEW · The circularity objection to the SAPM framework is resolved by distinguishing sign from magnitude and by showing that ΔW and Π are estimated from independent data sources. Proposition 1 (Estimand Independence) proves that ΔW and Π are drawn from disjoint data-generating processes. The falsification condition is that harm channels would need to be revenue-determined for βW to be circular; this is empirically false. Cross-domain regression of ΔW on revenue yields R²=0.12, indicating that revenue explains little of the variation in harm.

This manuscript defends the SAPM framework against the charge that system welfare W is defined circularly. It shows that the diagnosis (Hollow Win) and the metric (βW) are different claims—sign vs. magnitude—and that ΔW is estimated from harm channels independent of revenue. A falsification test confirms that βW is informative, not circular.