Welfare Criterion

Welfare Criterion

The basis by which one measures the benefits of a change against its drawbacks. For example, one may elect to make a change if everyone gains and no one loses, or if the number or the quality of the gains outpaces the number or quality of the losses. There is no single welfare criterion; the criterion used varies according to the ethics or preferences of the one(s) considering the change.
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Nearly all economists who study optimal tax theory use the social welfare function approach, along with the "more equality is better" social welfare criterion that it implies.
* Markus Brunnermeier, Princeton University and NBER; Alp Simsek, Harvard University and NBER; and Wei Xiong, Princeton University and NBER, "A Welfare Criterion for Models with Distorted Beliefs"
Is that the right welfare criterion from an economic perspective?
They found that while the consumer welfare criterion suggests overpurchase of insurance, a social welfare criterion that considers profits to an imperfectly competitive health care industry may lead to the opposite conclusion.
At this particular Pareto optimum, type H agents are assigned zero consumption in both periods (as the social welfare criterion (3) with [gamma] = 0 does not value their utility at all), and agents of type L consume the whole output of the Lucas tree Y = 1.
Explicit in all these works is that antitrust agencies face a national welfare criterion of which foreign producers and consumers are not part; yet consumer surplus (not national welfare) is the stated criterion for many antitrust agencies.
The better approach, for CBA, is this: Take each option, in turn, as a baseline and then pick the option with the highest number if the ranking of all the options from each baseline is the same,(84) and, if not, use a different decision procedure entirely (for example, the direct application of the welfare criterion).
This paper proposes simple axioms which capture the concept of sustainability, and derives the welfare criterion which they imply, see also Chichilnisky (1996).
The author's stated goal is to develop, within the bounds of Austrian theory, a welfare criterion that can be used to judge and possibly improve economic efficiency when market failure, i.e., externality, exists.
Razin and Loungani analyze how globalization induces monetary authorities, guided by the welfare criterion of a representative household, to put greater emphasis on reducing the inflation rate than on narrowing output gaps.
If one disagrees with a policy being advocated, that disagreement necessarily reflects disagreement with the economic model, the welfare criterion, or assumptions about institutional features of policy.
To allow the average consumer's preferences to determine the pricing structure faced by all consumers represents a misapplication of the Harberger welfare criterion.