• Table of Contents
    • Abstract
    • Keywords
    • Article
      • The first fundamental theorem, or, laissez-faire leads to the common good
      • First fundamental theorem drawbacks, and the second fundamental th
      • Adjusting the economy and voting
        • Applied welfare economics
        • Voting
      • Social welfare and the third fundamental th
      • Social welfare after Arrow
        • Social choice functions and strategy
        • The Gibbard–Satterthwaite th
        • Implementation and the Maskin th
      • Last words
    • See Also
    • Bibliography
    • How to cite this article

welfare economics

Allan M. Feldman
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by Steven N. Durlauf and Lawrence E. Blume
Alternate versions available: 1987 Edition
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Abstract

Welfare economics attempts to define and measure the ‘welfare’ of society as a whole. It tries to identify which economic policies lead to optimal outcomes, and, where necessary, to choose among multiple optima. This article answers three fundamental qsts with three fundamental theorems. In a competitive economy, will an equilibrium outcome be optimal? Can any optimal outcome be achieved by a modified market mechanism? Is there a reliable way to measure social welfare, or to derive the preferences of society from the preferences of individuals? The negative answer to the third question is partly overcome by the theory of implementation.
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How to cite this article

Feldman, Allan M. "welfare economics." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 21 December 2014 <http://www.dictionaryofeconomics.com/article?id=pde2008_W000050> doi:10.1057/9780230226203.1826

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