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