The term 'Welfare Economics' is included in the Economics edition of the Financial Dictionary. Get your copy on Amazon in Kindle, Paperback or Audio edition. Choose your edition here...
Welfare economics concentrates its studies on the best possible allocation for goods and resources in an economy. It looks at the ways that allocating such resources will impact the welfare of overall society. This pertains to the school of thought on the distribution of income and the ways that this will influence the overall good of society.
As such this becomes a subjective form of study. It assigns quantities to usefulness and welfare so that it can develop models to measure the improvements of individuals. This science came into its own as a clearly articulated economics theory branch in the years of the twentieth century.
Writers before the development of welfare economics thought of general welfare as only the sum total of satisfaction of all people living inside an economy. After this, later thinkers decided that it might not be realistic to measure even a single individual’s level of satisfaction. They made the case that it was not possible to compare two different people’s individual levels of well being. They skeptically considered the long held belief that poor people gain greater satisfaction than the rich do when they realize an income increase.
Today the branch of welfare economics considers both how resources are distributed and the way that this determines the aggregate level of contentedness within the society and economy. It does it on both an individual level and a total societal level. The theory seeks to determine an ideal distribution of resources for the maximum happiness of all its members to be achieved.
Welfare economics makes use of the techniques and point of view in microeconomics. It can also be combined to produce a macroeconomic conclusion. There are those economists who follow this branch of economics who argue that higher levels of all- around social good can be attained if the government will redistribute incomes fairly in the economy.
It also models theories of economic efficiency in predicting an ideal place where social happiness reaches the maximum level it can hit. Once this point is achieved, it means the economy functions so that additional changes will raise the happiness of one segment of society at the expense of another one.
There are a range of issues from welfare economics that help governments to develop their public policies. Among its chief goals is to create bare minimum standards for quality of living. This means the proponents of this economic school of thought are striving to see the governments make available basic and necessary services to the populace. They also want to have affordable housing options and enough jobs that pay livable wages for all members of society.
Capitalist concepts are in opposition to welfare economics. Straight capitalism rejects the notion of intensive intervention from the government in economic issues. Capitalism concentrates on individual ability, development, and choices in the pursuit of happiness through personal gain. Capitalism argues that the “invisible hand” will cause individuals who are pursuing their own personal enrichment to pursue actions that benefit the overall good.
Utility is an interesting concept from this branch of economics. It explains the value of a given good or service from the point of view of an individual. This value describes whether or not purchasers believe the value they receive for the particular service or good is equal to or higher than the cost to buy it. It also argues that individual units of currencies, like dollars or Euros, have the same values to individual people as they do to companies. It does not matter how vastly their relative incomes vary.