Concept
Welfare economics
Overview
Welfare economics is a field of economics that applies microeconomic techniques to evaluate the overall well-being (welfare) of a society.
The principles of welfare economics are often used to inform public economics, which focuses on the ways in which government intervention can improve social welfare. Additionally, welfare economics serves as the theoretical foundation for several instruments of public economics, such as cost–benefit analysis. The intersection of welfare economics and behavioral economics has given rise to the subfield of behavioral welfare economics.
Two fundamental theorems are associated with welfare economics. The first states that competitive markets, under certain assumptions, lead to Pareto efficient outcomes. This idea is sometimes referred to as Adam Smith's invisible hand. The second theorem states that with further restrictions, any Pareto efficient outcome can be achieved through a competitive market equilibrium, provided that a social planner uses a social welfare function to choose the most equitable efficient outcome and then uses lump sum transfers followed by competitive trade to achieve it. Arrow's impossibility theorem which is closely related to social choice theory, is sometimes considered a third fundamental theorem of welfare economics.
Overview adapted from Wikipedia (CC BY-SA 4.0; see the article history for authors).
Possible passages
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"Thou seest,"--say they,--"thou seest how many thousands of Jews there are which believe; and they are all zealous of the law. And they are informed of thee, that thou teachest all the Jews which are among the Gentiles to forsake Moses; saying, that they ought not to circumcise their children, neither to walk after their customs," Acts 21:20. "What is it, therefore?" add they, "the multitude must needs come…
Jeremy Bentham, Not Paul, but Jesus
The author is tied to Welfare economics in the knowledge graph.
We need only express and interpret this fact, instead of fancying ourselves bound to explain it away. It is an interest not less genuine and significant in economic experience than elsewhere (Sec.Sec. 6, 7). Its importance lies in the fact that it obliges us to regard what is called economic choice not as a balancing of utilities, marginal or otherwise, but as a process of "constructive comparison." The new…
John Dewey, Creative Intelligence
States what Welfare economics is.
The omission is no defect in them as abstract or hypothetical sciences, but it vitiates them in their practical application as branches of a comprehensive social science. In political economy, for instance, empirical laws of human nature are tacitly assumed by English thinkers, which are calculated only for Great Britain and the United States. Among other things, an intensity of competition is constantly supposed…
John Stuart Mill, A System of Logic, Ratiocinative and Inductive
States what Welfare economics is.
Philosophers who discussed Welfare economics
Related ideas
- Austrian school of economics
- Social choice theory
- Law of noncontradiction
- Behavioral economics
- Murray Rothbard
- Henry Sidgwick
- Well-being
- Totalitarianism
- Invisible hand
- Utilitarianism
- Vilfredo Pareto
- Altruism
- Cost–benefit analysis
- Jeremy Bentham
- Kenneth Arrow
- Amartya Sen
- Behaviorism
- Cardinal number
- Capability approach
- Reciprocity (cultural anthropology)
- Public economics
Opposing perspectives
Place in the tradition
Part of Philosophy and economics.