welfare economics

welfare economics

Branch of economics established in the 20th century that seeks to evaluate economic policies in terms of their effects on the community's well-being. Early theorists defined welfare as the sum of the satisfactions accruing to an individual through an economic system. Believing it was possible to compare the well-being of two or more individuals, they argued that a poor person would derive more satisfaction from an increase in income than would a rich person. Later writers argued that making such comparisons with any precision was impossible. A new and more limited criterion was later developed: one economic situation was deemed superior to another if at least one person had been made better off without anyone else being made worse off. See also consumer's surplus; Vilfredo Pareto.