welfare economics
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by
Steven
N.
Durlauf
and
Lawrence
E.
Blume
Alternate versions available:
1987 Edition
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Abstract
Welfare economics attempts to define and measure the ‘welfare’ of society as a whole. It tries to identify which economic policies lead to optimal outcomes, and, where necessary, to choose among multiple optima. This article answers three fundamental qsts with three fundamental theorems. In a competitive economy, will an equilibrium outcome be optimal? Can any optimal outcome be achieved by a modified market mechanism? Is there a reliable way to measure social welfare, or to derive the preferences of society from the preferences of individuals? The negative answer to the third question is partly overcome by the theory of implementation.
Keywords
Arrow social welfare function; Arrow's th; Bergson, A.; central planning; command economy; common good; compensation tests; competitive equilibrium; Condorcet, Marquis de; consumer surplus; Corn Laws; decentralized socialism; externalities; first fundamental theorem of welfare economics; implementation; industrial policy; interpersonal utility comparisons; Kaldor, N.; laissez-faire; Lange, O. R.; lump-sum taxes; lump-sum transfers; majority rule; mechanism design; Mises, L. E. von; Nash strategy; Pareto efficiency; partial equilibrium; Pigou, A. C.; Pigouvian taxes; plurality voting; preference misrepresentation; preference profiles; production plans; Scitovsky, T.; second fundamental theorem of welfare economics; Smith, A.; social choice function; socialism; strategic behaviour; third fundamental theorem of welfare economics; voting; voting cycles; voting paradoxes; welfare economics
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See Also
How to cite this article
Feldman, Allan M. "welfare economics." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 11 August 2017 <http://www.dictionaryofeconomics.com/article?id=pde2008_W000050> doi:10.1057/9780230226203.1826