Conclusion
Public policies are expected to increase social welfare. Welfare economics aims to provide the framework to accomplish such a goal, developing a wide range of techniques to adapt different situations.
However, looking carefully, this wonderful textbook world may be gloomier than it seems at first sight. Is welfare economics bound to die because of its difficulty in handling value judgements? Recommendations are always linked with some normative involvement, even through the undebated Pareto criterion. Beyond this, welfare economics suffers from the fact that a necessary discussion on the very definition of welfare had been avoided for too long. What is welfare? How can we justify this or that meaning of welfare for public policy? Pareto or Pigou acknowledge that, overall, welfare is much more than, or even different from, economic welfare. Yet Pareto developed a pure theory of ophelimity which was afterwards used by economists, although not under this name. Pigou eventually focused on economic welfare, and especially on the national dividend; from then on gross domestic product (GDP) appeared as an acceptable approximation of welfare for decades. These assumptions are increasingly debated.It now seems generally accepted that GDP is a questionable goal, and the definition of welfare has become a topic of discussion. The theory of fairness and social welfare, which took over all challenges faced by welfare economics, now provides a unified approach of social choice theory, the theory of fair allocations and public economics. Sen’s capability approach rehabilitates the role of public debate and reintroduces democracy in economics. All is in place to expect a promising future for (welfare) economics.
Antoinette Baujard