Welfare economics: Difference between revisions

From Citizendium
Jump to navigation Jump to search
imported>Stephen Saletta
No edit summary
imported>Nick Gardner
No edit summary
Line 1: Line 1:
{{subpages}}
{{subpages}}
[[Image:US Capitol dome.jpg|right|thumb|250px|{{#ifexist:Template:US Capitol dome.jpg/credit|{{US Capitol dome.jpg/credit}}<br/>|}}Government policy is a frequent topic in welfare economics.]]
The concept of welfare is concerned with the individual well-being and the subject matter of welfare economics is the influence of collective decisions upon the  welfare of groups of individuals. The theorems of welfare economics constitute the rationale for the measurement of [[economic efficiency]]
[[Economics]] is both a ''positive science'' and a ''normative science''. Economics as a '''positive science''' studies how markets and economies work, regardless of whether or not those institutions produce a desirable result. '''Welfare economics''' is the '''normative''' study of the types of outcomes that an economic system ''should'' be producing, and whether or not those outcomes are being produced.<ref>Hirshleifer, J and Hirshleifer, D (1997) ''Price Theory and Applications'' ISBN 0131907786</ref>


===The problem of interpersonal utility comparisons===
===Definition===
Welfare economics addresses the issue of interpersonal utility comparisons by using observations about consumption as a vector of choices rather than a utilitarian summation of the utility they derive from a particular consumption bundle. When making comparisons between more than one individual, a particular allocation of resources is '''pareto-optimal''' if you could not make one individual better off without making another person worse off.


===Fundamental theorems of welfare economics===
===Fundamental theorems of welfare economics===

Revision as of 09:31, 10 April 2008

This article is developing and not approved.
 Main Article
 Discussion
Related Articles  [?]
Bibliography  [?]
External Links  [?]
Citable Version  [?]
Tutorials [?]
 
https://en.citizendium.org/wiki/index.php?title=Welfare_economics&printable=yes
This editable Main Article is under development and subject to a disclaimer.

The concept of welfare is concerned with the individual well-being and the subject matter of welfare economics is the influence of collective decisions upon the welfare of groups of individuals. The theorems of welfare economics constitute the rationale for the measurement of economic efficiency

Definition

Fundamental theorems of welfare economics

In a market mechanism with flexible prices, individuals will continue to trade with each other until they reach an optimal outcome. The market provides a mechanism for individuals to communicate their preferences through prices so that each individual will be able to an optimal bundle of consumption given a particular budget constraint.

First theorem of Welfare Economics

In a market with many traders where prices are flexible, any equilibrium will be pareto-optimal.

Second theorem of Welfare Economics

Every outcome that is pareto-optimal can be realized in a market with many traders and flexible prices provided an appropriate initial distribution of endowments.


References

Retrieved from "https://citizendium.org/wiki/index.php?title=Welfare_economics&oldid=332592"