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
JEL Classifications
This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume
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Feldman, A.M. (2008). Welfare Economics. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_1417-2
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DOI: https://doi.org/10.1057/978-1-349-95121-5_1417-2
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Online ISBN: 978-1-349-95121-5
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Chapter history
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Latest
Welfare Economics- Published:
- 31 March 2017
DOI: https://doi.org/10.1057/978-1-349-95121-5_1417-2
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Original
Welfare Economics- Published:
- 01 December 2016
DOI: https://doi.org/10.1057/978-1-349-95121-5_1417-1