The strange disappearance of welfare economics

Abstract

Welfare economics, defined as the study of the principles underlying normative statements, has largely disappeared from mainstream economic discourse and curricula despite the persistent use of value judgments in policy analysis. This decline in critical scrutiny creates a disconnect between pervasive welfare-based assertions and their ethical or theoretical justifications. In modern macroeconomics, targets regarding inflation, public borrowing, and employment often lack explicit links to individual household welfare or foundational normative criteria. Specifically, the standard treatment of intertemporal allocation frequently relies on implicit assumptions concerning utility discounting and the weighting of generations that significantly alter policy conclusions. The reliance on representative agent models further obscures distributional conflicts and heterogeneity of interests. A rigorous evaluation of economic policy requires making these underlying objectives explicit, as the choice of welfare function—whether welfarist, Rawlsian, or capability-based—fundamentally shapes the resulting prescriptions. Reintegrating welfare economics into the core of the discipline is essential for ensuring logical consistency and understanding the moral underpinnings of economic recommendations. Such an inquiry is iterative, as the application of ethical principles to economic models can lead to the refinement of both the normative criteria and the economic analysis. – AI-generated abstract.