Welfare economics/Tutorials

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Tutorials relating to the topic of Welfare economics.

Social Welfare

The controversy among economists concerning the concept of social welfare is not dwelt on in the article because it has had little effect upon the practice of economics, but it may be of interest to philosophers and students of economics. The debate started in the 1920s with the publication of Pigou's "Economics of Welfare" [1]. Pigou observed that a unit increase in income adds more to the welfare of poor man than it adds to that of a rich man, and concluded that social welfare would be increased by a transfer from the rich to the poor. The first dissent came from Lionel Robbins, who argued that Pigou's analysis was faulty because it required interpersonal comparisons of welfare[2], and urged a return to Pareto's "unanimity rule" which had been proposed by Vilfredo Pareto, which stated that it could not be assumed that welfare would increase unless there would be some gainers and no losers [3]. The next development was the Arrow-Debreu proof that, on the assumptions noted in the article, an interacting system of markets could reach an equilibrium in which all markets clear simultaneously [4] (known as the "existence theorem" and referred to in some texts as the first fundamental theorem of welfare economics). That was followed by the publication of the two theorems set out in the article [5].


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  1. Arthur Pigou,: The Economics of Welfare Macmillan 1932 (first published: 1920)
  2. Lionel Robbins: "Interpersonal Comparisons of Utility", Economic Journal December 1938
  3. Vilfredo Pareto: Manual d’Economic Politique, Manuel Giard 1927
  4. Kenneth Arrow and Gerard Debreu: "The Existence of an Equilibrium for a Competitive Economy", Econometrica, vol. XXII 1954
  5. Kenneth Arrow: "An Extension of the Basic Theorem of Classical Welfare Economics", Proceedings of the Second Berkeley Seminar on Mathematical Statistics and Probability University of California Press 1951
  6. Samuelson Foundations of Economic Analysis Harvard University Press 1947
  7. Ian Little A critique of Welfare Economics Oxford Paperbacks 1960
  8. Colin Camerer and Ernst Fehr "When Does Economic Man Dominate Social Behaviour?" in Science 6th January 2006