Welfare Economics – Definition

Cite this article as:"Welfare Economics – Definition," in The Business Professor, updated September 19, 2019, last accessed October 28, 2020, https://thebusinessprofessor.com/lesson/welfare-economics-definition/.

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Welfare Economics Definition

Welfare economics emphasizes on the effective utilization and distribution of resources, and further studies what impact this distribution holds on social welfare. This is directly associated with the analysis of how income is distributed, and how the common product gets affected by it. Welfare economics is a form of subjective study which formulates models by allocating units of welfare. These models determine the developments to individuals on the basis of personal levels.

A Little More on What is Welfare Economics

Welfare economics considers the allocation of resources and how it influences the overall well-being of an economy. In the presence of various optimal levels in an economy in accordance with the resource allocation, welfare economics looks for the economic position that will make its members socially satisfied to the maximum levels.

Though welfare economics considers the tools and methods of microeconomics, but it can be summed up for making conclusions on macro level. There are some economists with a belief that with the redistribution of income in the economy, the larger states of comprehensive social welfare can be attained. This exhibits the theory behind the efficiency of an economy, stating that there is a point when the allocated resources can offer a maximum amount of social well-being, and attain the highest level of efficiency. In this situation, the economy starts performing in such a manner that the increase in emotional well-being of one field would only be possible if the well-being of another field is reduced.

Welfare Economics and Public Policy

Welfare economics and public policy

The problems relating to welfare economics can act as a premises while creating the public policy. Welfare economics strives to create a minimum quality of living expectation in a given field. This may cover how easily accessible the general services are, how reasonable the housing costs are, and the presence of job opportunities.

Welfare economics is contrary to capitalist ideals. In a pure capitalist economy, the government cannot interfere in economic affairs of the nation. Instead, the whole emphasis is placed on the preferences, development, and growth of individuals followed by the tracking of their personal wealth. The theory on which capitalism is based agrees that there will be a connected benefit that the society will encounter with the pursuit of personal wealth.

Welfare Economics and Utility

Welfare economics and utility

Utility is the recognized value concerned with a specific good or service. This recognized or perceived value is intrinsic in nature and ascertains if the value that a buyer receives from buying a good or service is at least equivalent to the amount of money that he or she spends on its purchase. Also, it states that a specific unit of currency like U.S. dollar will carry the similar perceived value for both an individual as well as a corporation, irrespective of the difference in the income levels of the entities.

References for “Welfare Economics

https://en.wikipedia.org/wiki/Welfare_economics

https://www.investopedia.com › Economy › Economics

https://www.economics.utoronto.ca/jfloyd/modules/welp.html

Academic research for “Welfare Economics

Uncertainty and the welfare economics of medical care, Arrow, K. J. (1978). Uncertainty and the welfare economics of medical care. In Uncertainty in Economics (pp. 345-375). Academic Press.

Welfare propositions of economics and interpersonal comparisons of utility, Kaldor, N. (1939). Welfare propositions of economics and interpersonal comparisons of utility. The Economic Journal, 549-552.

The foundations of welfare economics, Hicks, J. R. (1939). The foundations of welfare economics

A reformulation of certain aspects of welfare economics, Burk, A. (1938). A reformulation of certain aspects of welfare economics. The Quarterly Journal of Economics, 52(2), 310-334.

Cardinal utility in welfare economics and in the theory of risk-taking, Harsanyi, J. C. (1953). Cardinal utility in welfare economics and in the theory of risk-taking. Journal of Political Economy, 61(5), 434-435.

Applied welfare economics with discrete choice models, Small, K. A., & Rosen, H. S. (1981). Applied welfare economics with discrete choice models. Econometrica (pre-1986), 49(1), 105.

Welfare Economics and the Theory of the State, Baumol, W. J. (2004). Welfare Economics and the Theory of the State. In The encyclopedia of public choice (pp. 937-940). Springer, Boston, MA.

Positive economics, welfare economics, and political economy, Buchanan, J. M. (1959). Positive economics, welfare economics, and political economy. The Journal of Law and Economics, 2, 124-138.

[PDF] An extension of the basic theorems of classical welfare economics, Arrow, K. J. (1951). An extension of the basic theorems of classical welfare economics. In Proceedings of the second Berkeley symposium on mathematical statistics and probability. The Regents of the University of California.

A reappraisal of welfare economics, Nath, S. K. (1969). A reappraisal of welfare economics (No. HB99. 3 N39 1969). London: Routledge & Kegan Paul.

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