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 "economic, economics, welfare economics, welfare":
... 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 ...
... Samuelson's Foundations demonstrates that economic analysis benefits from the parsimonious and fruitful language of mathematics ... Committee of Harvard University in 1941, it was subtitled "The Observational Significance of Economic Theory" (p ... occurred only in the course of writing on them—from consumer's behavior and production economics of the firm to international trade, business cycles, and ...
... 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 ...
... 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 ...
... 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 ...
Famous quotes containing the words economics and/or welfare:
“The new sound-sphere is global. It ripples at great speed across languages, ideologies, frontiers and races.... The economics of this musical esperanto is staggering. Rock and pop breed concentric worlds of fashion, setting and life-style. Popular music has brought with it sociologies of private and public manner, of group solidarity. The politics of Eden come loud.”
—George Steiner (b. 1929)
“I have an intense personal interest in making the use of American capital in the development of China an instrument for the promotion of the welfare of China, and an increase in her material prosperity without entanglements or creating embarrassment affecting the growth of her independent political power, and the preservation of her territorial integrity.”
—William Howard Taft (18571930)