Abstract
This chapter simultaneously considers social welfare and efficiency. If social production, Φ, and social welfare, W, were functions whose values could be quantitatively measured in the same units, one could choose a weight, σ, verifying 0 < σ < 1, and then maximize the following function: \(\sigma \Phi + (1 - \sigma )W\). But W measures nothing, it simply establishes an order, and thus this possibility is out of the question. Hence, we must find an indirect way to simultaneously maximize the two proposed functions.
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Notes
- 1.
In Chap. 9 it will be shown that, when working in a dynamic framework, it is mandatory to consider individual consumption as the argument of social welfare functions.
- 2.
See also Chap. 4, Sects. 4.2 and 4.3.
- 3.
Considering consumption instead of income will be necessary when operating the model in a dynamic environment, as shown in Chap. 9.
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© 2013 Springer-Verlag Berlin Heidelberg
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Nicola, P. (2013). Efficiency and Welfare. In: Efficiency and Equity in Welfare Economics. Lecture Notes in Economics and Mathematical Systems, vol 661. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-30071-4_5
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DOI: https://doi.org/10.1007/978-3-642-30071-4_5
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Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-30070-7
Online ISBN: 978-3-642-30071-4
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