Welfare economics is a branch of economics that uses microeconomic techniques to evaluate economic well-being, especially relative to competitive general equilibrium within an economy as to economic efficiency and the resulting income distribution associated with it. It analyzes social welfare, however measured, in terms of economic activities of the individuals that compose the theoretical society considered. Accordingly, individuals, with associated economic activities, are the basic units for aggregating to social welfare, whether of a group, a community, or a society, and there is no "social welfare" apart from the "welfare" associated with its individual units.
Welfare economics typically takes individual preferences as given and stipulates a welfare improvement in Pareto efficiency terms from social state A to social state B if at least one person prefers B and no one else opposes it. There is no requirement of a unique quantitative measure of the welfare improvement implied by this. Another aspect of welfare treats income/goods distribution, including equality, as a further dimension of welfare.
Social welfare refers to the overall welfare of society. With sufficiently strong assumptions, it can be specified as the summation of the welfare of all the individuals in the society. Welfare may be measured either cardinally in terms of "utils" or dollars, or measured ordinally in terms of Pareto efficiency. The cardinal method in "utils" is seldom used in pure theory today because of aggregation problems that make the meaning of the method doubtful, except on widely challenged underlying assumptions. In applied welfare economics, such as in cost-benefit analysis, money-value estimates are often used, particularly where income-distribution effects are factored into the analysis or seem unlikely to undercut the analysis.
The capabilities approach to welfare argues that freedom - what people are free to do or be - should be included in welfare assessments, and the approach has been particularly influential in development policy circles where the emphasis on multi-dimensionality and freedom has shaped the evolution of the Human Development Index.
Other classifying terms or problems in welfare economics include externalities, equity, justice, inequality, and altruism.
Read more about Welfare Economics: Two Approaches, Efficiency, Income Distribution, A Simplified Seven-equation Model, Efficiency Between Production and Consumption, Social Welfare Maximization, Welfare Economics in Relation To Other Subjects, Paretian Welfare Economics, Criticisms
Other articles related to "welfare economics, welfare, economic, economics":
... of the Austrian School, doubt whether a cardinal utility function, or cardinal social welfare function, is of any value ... It should be noted that it is possible to do welfare economics without the use of prices, however this is not always done ... Value assumptions explicit in the social welfare function used and implicit in the efficiency criterion chosen tend to make welfare economics a normative and perhaps subjective field ...
... Among welfare economists of the utilitarist school it has been the general tendency to take satisfaction (in some cases, pleasure) as the unit of welfare ... If the function of welfare economics is to contribute data which will serve the social philosopher or the statesman in the making of welfare judgements, this tendency leads perhaps, to a ...
... In welfare economics, a social planner is a decision-maker who attempts to achieve the best result for all parties involved ... In neo-classical welfare economics, this means the maximization of a social welfare function ... In modern welfare economics, there is a greater emphasis on Pareto optimality, in which no one's economic status can be improved without worsening someone else's ...
... Samuelson's Foundations demonstrates that economic analysis benefits from the parsimonious and fruitful language of mathematics ... was subtitled "The Observational Significance of Economic Theory" (p ... of writing on them—from consumer's behavior and production economics of the firm to international trade, business cycles, and income analysis ...
... The ethics of economic systems deals with the issues such as how it is right (just, fair) to keep or distribute economic goods ... Economic systems as a product of collective activity allow examination of their ethical consequences for all of their participants ... Ethics and economics relates ethical studies to welfare economics ...
Famous quotes containing the words economics and/or welfare:
“There is no such thing as a free lunch.”
An axiom from economics popular in the 1960s, the words have no known source, though have been dated to the 1840s, when they were used in saloons where snacks were offered to customers. Ascribed to an Italian immigrant outside Grand Central Station, New York, in Alistair Cookes America (epilogue, 1973)
“Borrow a child and get on welfare.
Borrow a child and stay in the house all day with the child,
or go to the public park with the child, and take the child
to the welfare office and cry and say your man left you and
be humble and wear your dress and your smile, and dont talk
—Susan Griffin (b. 1943)