Welfare economics: introduction and development of basic concepts

Abstract

This book provides an introduction to welfare economics, covering the key concepts and theories in the field. The author introduces the concept of social welfare, contrasting welfare with utility and examining the distinction between subjective judgments of fact and value judgments. The book proceeds to discuss Pareto optimality, welfare criteria, and consumer surplus. The author then tackles the problem of social choice and the impossibility theorems of Arrow, Kemp-Ng, and Parks. He argues that revealing the intensities of preferences can resolve this impossibility and proposes a utility-based social welfare function. The author also discusses the optimal distribution of income, the theory of externalities, and the problems of public goods. He then examines the theory of second best and its limitations before introducing his own theory of third best. Finally, the author argues that, in practice, a dollar is a dollar and that it is more efficient to use progressive income taxation to achieve equity, rather than resorting to other forms of preferential treatment. The book also considers the broader question of social welfare and the implications of economic growth on individual happiness. – AI-generated abstract.