Economics · A History of Economic Thought by V Lokanathan
Chapter 31 : WELFARE ECONOMICS
Table of contents20 sections
- 1.WELFARE ECONOMICS
- 2.Introduction
- 3.Key Terms
- 4.📌 Exam Tidbits
- 5.J. A. Hobson (1858-1940)
- 6.Key Terms
- 7.📌 Exam Tidbits
- 8.A. C. Pigou (1877-1959)
- 9.Social and Marginal Private Costs and Benefits
- 10.Key Terms
- 11.📌 Exam Tidbits
- 12.THE NEW WELFARE ECONOMICS
- 13.Pareto (1848-1923)
- 14.J. R. Hicks
- 15.Key Terms
- 16.📌 Exam Tidbits
- 17.Conclusion
- 18.Key Terms
- 19.📌 Exam Tidbits
- 20.Quick-Recall Box
Chapter preview
WELFARE ECONOMICS
Introduction
Prof. A. C. Pigou is regarded as the father of welfare economics, which has now become a distinct branch of economic science. The discipline is primarily concerned with leading questions such as: Is the economy functioning well? Is the society's system of distribution good? What can be done about improving total well-being? To what extent must the government intervene to promote economic welfare?
Liberal economists argue that in a Welfare State, government policies must aim at maximizing welfare, contending that value judgments must enter into policy-making decisions.
Definitions of Welfare Economics
| Economist | Definition Focus |
|---|---|
| Reder | "Welfare economics is the branch of economic science that attempts to establish and apply criteria of propriety to economic policies." |
| Oscar Lange | In his Essays on the Foundations of Welfare Economics, he provides the simplest and most useful definition: "Welfare economics is concerned with the conditions which determine the total economic welfare of a community." |
Historical Evolution of the Welfare Concept
| Stage / Economist | Contribution to Welfare Ideas |
|---|---|
| Adam Smith | Considered a larger per capita output (resulting from larger production) as an index of welfare. |
| Jeremy Bentham & the Utilitarians | Promoted the goal of the "greatest happiness of the greatest number" (an idea Bentham borrowed from Francis Hutcheson). |
| J. S. Mill | Provided ideas for promoting welfare within his peculiar individualist-socialist programme. |
| Alfred Marshall | Considered economics as the science dealing with the causes of material welfare. He introduced the concept of consumer's surplus, presenting welfare economics with an analytical tool. However, his Principles of Economics was only an engine of economic analysis, not a programme of social reform. |
Key Terms
| Concept | Definition |
|---|---|
| Welfare Economics | The branch of economic science concerned with the conditions determining total economic welfare and the application of criteria of propriety to economic policies (defined by Oscar Lange and Reder). |
| Consumer's surplus | An analytical tool introduced by Alfred Marshall to measure economic welfare. |
📌 Exam Tidbits
- Prof. Pigou is universally regarded as the father of welfare economics.
- Oscar Lange wrote Essays on the Foundations of Welfare Economics.
- Bentham borrowed the phrase "greatest happiness of greatest…
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