Talk:Welfare economics

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starting and omissions[edit]

In writing this article I have tried to present the basic concepts of WE to non-economists in the first part of the article, then present some fundamental WE analysis for people with an economics background in the second half of the article. However, this article just skims the surface of WE. I have deliberately omitted WE concepts such as:

  • compensated demand curves
  • equivalent variation
  • compensating variation
  • arrows theorem
  • the second best theorem
  • general equilibrium vs partial equilibrium approaches to WE
  • dynamic welfare optimization
  • input-output models
  • gini coefficient
  • lorenz curve
  • the welfare cost of monopoly
  • the welfare cost of externalities
  • the welfare cost of price discrimination

I think all of these are better handled as separate articles. Firstly, because they are not central to WE fundamentals, and secondly the article is already 9 computer screens long (which is 3 screens longer than my usual self imposed limit). mydogategodshat 03:30, 11 Feb 2004 (UTC)

price discrimination[edit]

In the article, price discrimination is listed as a possible source of economic inefficiency. It's been a while since I've studied this, but it seems to me that price discrimination should actually increase efficiency. A uniform price prevents some transactions that would be socially efficient, namely those where the potential buyer's value is higher than the seller's cost, but lower than the market price. Isomorphic 00:00, 3 Jul 2004 (UTC)

Yes, price discrimination should generally increase economic efficiency as compared to flat monopoly pricing. Jrincayc 16:10, 4 Jul 2004 (UTC)

Marginal Rate of Transformation[edit]

(moved from village pump technical)

Could you please review the definition of the Marginal Rate of Transformation in the Welfare Economics section. It should be the Marginal Rate of Technical Substitution when it refers to the mix of factors of production used in a particular production process. It is the slope the isoquant. On the other hand, the Marginal Rate of Transformation is the slope of the Production Possibilities Frontier.

Your descriptions of the MRT and the MRTS are accurate. Both come into play in Pareto efficiency. The marginal rates of technical substitution (also called the marginal rates of factor substitution) must be equal if a firm or industry is to achieve production efficiency. Further the marginal resource costs must equal the marginal revenue products for all production. This is the third criterion. In addition to this, The marginal rate of transformation (that is, the rate at which one product can be exchanged for another product in production) must be equal for all products. This is the second criterion. From what I can see, both descriptions in the article are accurate. mydogategodshat 06:47, 9 Jun 2005 (UTC)

VOTE!! - HDI in Infobox#Countries|country infobox/template?[edit]

The Human Development Index (HDI) is a standard UN measure/rank of how developed a country is or is not. It is a composite index based on GDP per capita (PPP), literacy, life expectancy, and school enrollment. However, as it is a composite index/rank, some may challenge its usefulness or applicability as information.

Thus, the following question is put to a vote:

Should any, some, or all of the following be included in the Wikipedia Infobox#Countries|country infobox/template:

(1) Human Development Index (HDI) for applicable countries, with year;
(2) Rank of country’s HDI;
(3) Category of country’s HDI (high, medium, or low)?



E Pluribus Anthony 01:52, 20 September 2005 (UTC)

Added links[edit]

I added the links to Arrow's impossibility theorem and National Income, including my discussion of the SNI at wikinfo which gives a nice introduction to lay persons about the link between Welfare Economics and the GNP they read about.

PM. See the Hicks diagram reproduced in my book "Voting theory for democracy", about the addition of individual indifference curves to create the agggregate indifference curve. See Perhaps someone feels like re-creating that diagram in the current style of this page ? Colignatus 16:49, 4 March 2006 (UTC)

Pareto optimality[edit]

I'm a bit concerned about talking about moving an economy toward "Pareto optimality" while explaining the Kaldor-Hicks criteria. This is not strictly correct is it? It might also confuse people between the two concepts. RoyalTS 21:31, 6 March 2006 (UTC)

Counter Example[edit]

The claim of the ideal state of affairs can only come about, if it includes this criteria is false:

The claim:

The marginal rate of transformation in production is identical for all products. This occurs when it is impossible to increase the production of any good without reducing the production of other goods.

This is a false claim with the following counter-example:

The United States no longer sees horse-carriages that have been replaced by the automobile. The increased production of the automobile reduced the production of the horse-carriage implying that Pareto efficiency never existed or could never exist, because it cannot account for all things including future technology that greatly improved the efficiency of all things by the automobile (the United State production capability doubled after adjusting for inflation and other economic factors from 1950 to 1990 and the automobile and resulting highways was just one technology influence of this). The automobile technology is about 120 years old, and the horse-carriage has been around since time immemorial, but the horse-carriage is now is very uncommon and replaced by the automobile. This is a counter-example, therefore the description of ideal state of affairs is inadequate, and you know in mathematics and philosophy that means it is worthless.

Hi Anonymous - you're making intertemporal comparisons, but the general equilibrium model, which is used for welfare economics, is a static one. There are lot's of objections to be raised in microeconomic theory, but this isn't one. --Sven1982 19:54, 18 April 2006 (UTC)

Talk:Social Choice and Individual Values[edit]

Announcement: The above is the discussion tab for a new article Social Choice and Individual Values. Input is welcome through the article, the Talk page, or to me. The plan is to gather comment, corrections, or suggestions for probably at least a couple of weeks, make final changes, then go from there. Links to related articles (indluding the present one) would come after revision. Thanks for your help.

Thomasmeeks 22:53, 27 May 2006 (UTC)

Rawls and Max-Min[edit]

The current section on income distribution seems very misleading to me. I don't think that John Rawls had anything to do with developing the Max-Min function as this article states. I've read a fair bit of Rawls, and my understanding is that his position is usually seen as opposing the concept of utility entirely. There may be some similarities between Max-min and Rawls's ideas (mainly that both look towards the wellbeing of the worst off), but Rawls's ideas are different. I'm taking out the parts about Rawls right now because they're simply wrong. The Max-Min discussion should probably be reviewed too. I found this link which might help me or others with Max-min.--Bkwillwm 04:10, 15 September 2006 (UTC)

Equivalent-Compensating Variation[edit]

I believe a link should be made to those two pages as they are important in welfare economics. Perhaps Consumer Surplus would also be important to note. While the author mentioned that they should be seperate articles, I did not see any link to those articles Canking 00:13, 3 December 2006 (UTC)

positive economics[edit]

In the lede was, It is conventional to distinguish two sides to welfare economics: economic efficiency and income distribution. Economic efficiency is largely positive and deals with the "size of the pie". Income distribution is much more normative and deals with "dividing up the pie".

I've pulled that out. Welfare economics is normative--the analysis of consumer surplus, for instance, is normative. At least that's the primary approach to distinguishing normative from positive. Normative policy judgments are always based partially on positive economics: Positive: Does policy X achieve economic growth? Normative: Is economic growth good? => Normative: Should we implement policy X?

But just the basics of things like Pareto optimality, etc. are normative economics. (See Introduction, for instance.) I gather there are some ideas of normative economics which are different, but I'm pretty sure those are secondary, and don't have a good source on them. Further elaboration is certainly welcome. CRETOG8(t/c) 07:02, 16 November 2008 (UTC)

That's a good source, although it would be interesting to read more than the first page. Mark Blaug has an interesting discussion on this, and he places "Paretian welfare economics firmly within the camp of normative economics".[1] Still, he seems to regard it as something with a fair amount of debate and confusion -- he says welfare economics is obviously normative, but seems to think a lot of people still argue that it is value-free, especially since things like Pareto improvements are uncontroversial among economists. II | (t - c) 09:22, 16 November 2008 (UTC)


How can a monopoly or oligopoly be deemed inefficient when economies of scale amd minimum efficient scales necessarily mean that many industries will have only a few large firms. Can you have a perfectly competitive steel industry?


I have a Ph.D. and I found the introduction and first section completely incomprehensible. I wonder what less educated readers make of it? There must be a way to describe this topic in plain straightforward English. For instance the online Encyclopedia Britannica says, "welfare economics, [is the] branch of economics that seeks to evaluate economic policies in terms of their effects on the well-being of the community."

The article on welfare explains that it is "charity" provided by the government. So does "welfare economics" study government charity? Why not say so? Nick Beeson (talk) 02:58, 13 December 2012 (UTC)

Inefficiency: Does price discrimination belong? / References.[edit]

I thought price discrimination was an example of efficiency, not inefficiency? As in, by charging those who value a product more than the current market price at their value, it shifts the supply curve and lowers equilibrium, allowing more people to afford the good?

Also, while a lot of this seems right, doesn't it need references linked to the writing? I'm seeing a section at the bottom that says references, but none of it is linked in the text. Correct me if that doesn't need to be done. >_< Eleutheria Sleuth (talk) 08:43, 27 May 2014 (UTC)