Welfare EconomicsPaul E. Weston, Robert N. Townsend Welfare economics is a branch of economics that uses microeconomic techniques to simultaneously determine allocative efficiency within an economy and the income distribution associated with it. It analyses social welfare, however measured, in terms of economic activities of the individuals that comprise the theoretical society considered. As such, 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. Here, 'welfare' in its most general sense refers to well-being. 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. It is conventional to distinguish two sides to welfare economics: economic efficiency and income distribution. Economic efficiency is largely positive and deals with the "size of the pie". Income distribution is much more normative and deals with "dividing up the pie". Other classifying terms or problems in welfare economics include externalities, equity, justice, inequality, and altruism. This book presents the latest research in the field from around the world. |
Contents
The Institutions of Poverty | 35 |
A Project Africa | 59 |
The Identification and Measurement of Poverty | 97 |
Copyright | |
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Common terms and phrases
accountability Africa agent agreement analysis approach assets assume average axiom benefit capital comparative considered constant consumption cooperation cycles decreasing demand depends determined developing distribution dynamics Economic effect effort energy environmental equal equation equilibrium ETR VII example factor Figure firms fixed free trade function further given growth higher household human important income increase individual investment Journal knowledge labor lead long term lower means needs negative Note optimal parameter period physical play poor population positive possible poverty measure present problem production reduces regional relative rental housing representative requires respect shows social steady subsidy Substituting supply Table tariff rate tax rate term theory trade transfer transportation costs unemployment union unit utility variables wage welfare workers yields