What are the problems of measurement of Social welfare?
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Some, such as economists in the tradition of the Austrian School , doubt whether a cardinal utility function, or cardinal social welfare function, is of any value. The reason given is that it is difficult to aggregate the utilities of various people that have differing marginal utility of money, such as the wealthy and the poor.
Also, the economists of the Austrian School question the relevance of Pareto optimal allocation considering situations where the framework of means and ends is not perfectly known, since neoclassical theory always assumes that the ends-means framework is perfectly defined.
Some even question the value of
ordinal utility functions. They have proposed other means of measuring well-being as an alternative to price indices, willingness to pay functions, and other price-oriented measures. [ citation needed ] These price-based measures are seen as promoting consumerism and
productivism by many. [ citation needed ] It is possible to do welfare economics without the use of prices; however, this is not always done. [citation needed ]
Value assumptions explicit in the social welfare function used and implicit in the efficiency criterion chosen tend to make welfare economics a normative and perhaps subjective field. This can make it controversial.
However, perhaps most significant of all are concerns about the limits of a utilitarian approach to welfare economics. According to this line of argument, utility is not the only thing that matters and so a comprehensive approach to welfare economics should include other factors. The
capabilities approach is an attempt to construct a more comprehensive approach to welfare economics, one in which an individual's well-being and agency are evaluated in terms of their capabilities and functionings.
[Source: Wikipedia ]
Also, the economists of the Austrian School question the relevance of Pareto optimal allocation considering situations where the framework of means and ends is not perfectly known, since neoclassical theory always assumes that the ends-means framework is perfectly defined.
Some even question the value of
ordinal utility functions. They have proposed other means of measuring well-being as an alternative to price indices, willingness to pay functions, and other price-oriented measures. [ citation needed ] These price-based measures are seen as promoting consumerism and
productivism by many. [ citation needed ] It is possible to do welfare economics without the use of prices; however, this is not always done. [citation needed ]
Value assumptions explicit in the social welfare function used and implicit in the efficiency criterion chosen tend to make welfare economics a normative and perhaps subjective field. This can make it controversial.
However, perhaps most significant of all are concerns about the limits of a utilitarian approach to welfare economics. According to this line of argument, utility is not the only thing that matters and so a comprehensive approach to welfare economics should include other factors. The
capabilities approach is an attempt to construct a more comprehensive approach to welfare economics, one in which an individual's well-being and agency are evaluated in terms of their capabilities and functionings.
[Source: Wikipedia ]
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