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Welfare Economics






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Welfare economics is the branch of economics which is primarily concern with
the promotion of the welfare of the community as measured an the satisfaction drive
from the economic good, as the disposal of the community. It is the function of
welfare economics to help in the formulation of economic policies calculated to
maximum social welfare.
The analysis of the efficiency of the economy with maximum to the
satisfaction as the yards-stick is known as the welfare economics. welfare economic
is that branch of economic analysis which is concern with the establishment of
criteria that can provide the positive basis for adopting policies which are likely to
maximize social welfare can summarize it as the principle function of welfare
economic is to provide standards of judgment by which one can judge economic
policies and events from the point of view from the social welfares.
As Scitovsky’s observe; welfare economic is the part of the general body of
economics theory which is concern with the policy so it has to define as economic
optimum may be. It has to lay down conditions for maximizing welfare and prescribe
policies with that ending view.
A distinction may be drawn between economic welfare and general welfare
and individual’s welfare may related to his physical well being spiritual well being r
economic well being. the concept of the welfare according to Robbins,”embrassis
many states on mine, some on merely sensual some of most spiritual nature but the
class economic will not be 1 of them”. Obviously economic is not concern with the
physical or spiritual well being. it is only concern with that aspect of indivual’s well
being which derived from economic goods and services. In Pigou’s view the range of
our inquiry has been restricted to part of social welfare that can be brought directly or
indirectly into relation with the measuring road of money. This part of welfare may be
called economic welfare. Welfare refers to the state of mine or as Pigou says ”the
elements of the welfare are states of consciousness” this is no doubt as our
subjective concept but it can be imparted an element of objectivity. by linking
individual welfare to individual choice so that his welfare map in his preference map.
For instance, if he chooses apple rather than oranges he could increase his
welfare by consuming apples rather than oranges person choice is determine by the
large number of variable sum of which are economic and others not. Welfare
economic ignores the non economic variable v might say that the economic welfare
refers to satisfaction drive from the consumption of economic goods where as
general welfare refers to the satisfaction drive from both economic and non
economic goods. On the later analysis it is imagined that mind is like a well of
unknown depth, partly filled the water the level of which could altered by turning on
various tabs labeled economic political ect. Once the water in the well there is no
one saying which tap it came from and also it is impossible to say how much water
there is in the well.
As professor cannon says there is no precise line between economic and non

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economic satisfaction and therefore province of economics cannot be mark out by a
row of posts or a fence, like a political territory or a land property.
Positive economics explains an economic phenomenon and normative
economic comments on the desirability of that phenomenon. For instance Positive
economics explains why wealth in the community is un equally distributed and
normative economics would say whether the unequal distribution of the wealth is
desirable or not. The idea underlying the essential difference between positive
economics welfare economics can be explained in another way. The principal of
economics can be rejected if they cannot be verified and established in the light of
actual experience in the real world. The proportions of welfare economics are rather
different. They are based on assumptions some of which may or may not be realistic.
From the assumption we deduce conditions for maximizing welfare. Even if the
conditions are fulfilled the welfare may not be increased because the assumption
may turn to be inappropriate. It is difficult to say whether welfare has actually
increased since welfare is not a quantity like a market price or an item of personal
consumption. Testing a welfare proportion is an accidently difficult affair for private
estimation of welfare is likely to differ widely. Where the normal way of testing a
theory in a positive economics is is to test its conclusions, the normal way of testing
a welfare proportion is to test its assumptions. In positive economic assumptions are
simplified and adopted as convenient to draw conclusion and one worries only when
conclusion came to be applied in the real world. But the assumptions of the welfare
economics are more serious affair. It is clear that interest attaching to a theory of
welfare depend almost entirely upon the realism and relevance of its assumptions in
a particular historic context.
Social welfare has been defined as an aggregate of the utilities or satisfaction
of all the individuals in the society. The society consists of the millions of the
individuals who choose differently. The society has no mind of its own upon from
individuals. If in a society an economic measure or the policy makes some individual
better off and others worse off we cannot say what has happen to the social welfare
whether it has gone up or down. This however is sufficient for our purpose we can
assume the rational behavior on part of consumer in the mass. In driving the social
welfare from the individual welfare with the problem of inters personal comparison.
All are agreed that a rich man enjoys a greater measure of economic welfare than a
poor man. It is not really inter personal comparison that is comparing the utility are of
Positive Economics
Deals with the facts of the economy
Normative Economics
Deals with value of judgment about the situation

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the rich person with that of the poor person. It may on the other hand be considered
and inter personal comparison in which the same person compares the two
situations. He can say if he becomes a rich he would drive the greater satisfaction.
Broadly speaking the welfare of the individuals is synonyms with the welfare
of the society but the case of the diversions are not uncommon. PSIGOU has
mentioned several situations in which there is a diversion between the value of
marginal social and marginal private net product. For instance when tenant leaves
the land in an improved condition at the end of the lease the private net product will
be less than the social net product. Such a diversions will be found to occur in all
cases in which contract between two parties for the return of the durable producers
good in a better conditions. Again there are cases when a person accidently.
Tally renders a service to some other persons, for whom he gets no payment
or no payment can be exacted. In such cases again, private net product will be less
than the social net product, e.g., a light house benefiting ships on which no toll could
be levied, investment made in private parks improving the air of the neighborhood,
lamps installed at the doors of private houses, investment on prevention of smoke
from factory chimneys, etc. if the smoke is not prevented, the social net product will
be less than the private net product, for the smoke inflicts a heavy uncharged on the
community in the form of damage to buildings, vegetables increased expense on
washing clothes, cleaning rooms, etc. moreover when investment is made on
research lending to inventions which cannot be kept a secret or got patented, the
investor passes on to the society a part of the benefit. Here also private net product
is less than the social net product.
On the other hand, there are cases where social net product is less than the
private net product. This will happen when there are technical difficulties of enforcing
compensation for disservices incidentally rendered in the case of a factory smoke
inflicting loss or damage on the neighborhood, as mentioned above. The other
examples are the game preserving activities of some landlords resulting in damage
to the neighbor’s crops by rabbits and other wild animals, owner of the factory in the
heart of the city, production and sale of intoxicants, evils arises out of the foreign
investments, a loan financing a foreign war, women working in factories immediately
before and after confinement. In all such cases, private net product is greater than
the social net product. In other words, the individuals gain at the expense of the
society. Individual welfare is promoted but social welfare is reduced.
Thus the divergence between the individual welfare and social welfare arises
from the existence of uncompensated services and uncharged disservices. They
occur in all market forms, viz, perfect competition, monopolistic competition,
monopoly etc. the state can reduce this divergence and bring about the harmony
between individual and social welfare through fiscal measures like bounties and
Credit of systematizing the study of welfare economics belongs to professor
Pigou. The basic postulate put forward by him relates to man’s equal capacity of

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