Summary
Welfare economics analyses different states in which markets or the economy can be. Its main objective is to find an indicator or measure in order to guarantee that markets are behaving optimally, thus also guaranteeing that consumer welfare is as high as possible. In this Learning Path, we learn about the basics of welfare economics.Definition and main economists:
- Welfare economics
- Arthur C. Pigou
- Vilfredo Pareto
Efficiency and optimal allocation:
Pigou was a British economist (1877-1959), disciple of Alfred Marshall, whom he succeeded as a professor at Cambridge. Pigou is remembered above all as a precursor of welfare economics, for his books “Wealth and Welfare”, 1912, and “The Economics of Welfare”, 1920, in which he used measures of national income and its distribution in order to understand how wealth and welfare are related. He is also remembered for making a distinction between different degrees of price discrimination.
Being part of the Cambridge school, Pigou used common tools derived from neoclassical economics, such as marginalism, amongst others.
As we’ll see next, Pigou’s works on welfare economics were as great as Vilfredo Pareto’s.
