Social welfare function

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In w:welfare economics, a social welfare function is a function that ranks social states (alternative complete descriptions of the society) as less desirable, more desirable, or on the indifference curve for every possible pair of social states. Inputs of the function include any variables considered to affect the w:economic welfare of a society.[1] In using welfare measures of persons in the society as inputs, the social welfare function gets its form from w:methodological individualism. One use of a social welfare function is to represent prospective patterns of collective choice as to alternative social states. The social welfare function provides the government with a simple guideline for achieving the optimal distribution of income.[2]

The social welfare function is analogous to the w:consumer theory of w:indifference curvew:budget constraint tangency for an individual, except that the social welfare function is a mapping of individual preferences or judgments of everyone in the society as to collective choices, which apply to all, whatever individual preferences are for (variable) constraints on factors of production.

There are two major distinct but related types of social welfare functions:

  • A Bergson–Samuelson social welfare function considers welfare for a given set of individual preferences or welfare rankings.
  • An Arrow social welfare function considers welfare across different possible sets of individual preferences or welfare rankings and seemingly reasonable axioms that constrain the function.[3]

Bergson–Samuelson social welfare function[edit | edit source]

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Wikipedia has an article on:

Abram Bergson and Paul Samuelson came up with a social welfare function. Why not? Everyone else was coming up with them!

Arrow social welfare function[edit | edit source]

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Kenneth Arrow devised this. Go read about it on English Wikipedia

References[edit | edit source]

  1. Amartya K. Sen, 1970 [1984], Collective Choice and Social Welfare, ch. 3, "Collective Rationality." p. 33, and ch. 3*, "Social Welfare Functions." Description.
  2. Tresch, Richard W. (2008). Public Sector Economics. New York: PALGRAVE MACMILLAN. p. 67. ISBN 978-0-230-52223-7.
  3. Prasanta K. Pattanaik, 2008. "social welfare function," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.