Description: Welfare economics is a branch of economics that focuses on the optimal allocation of resources and goods to improve social welfare. This approach not only considers economic efficiency but also evaluates how economic decisions affect people’s quality of life. Through welfare economics, the aim is to understand and measure individual and collective well-being, taking into account factors such as wealth distribution, equity, and social justice. Analytical tools are used to assess public policies and their impact on overall welfare, allowing economists and policymakers to design interventions that maximize social well-being. Welfare economics is also related to concepts such as utility, which measures the satisfaction individuals derive from goods and services, and consumer surplus, which represents the additional benefit consumers receive by paying less than they are willing to pay. In this sense, welfare economics becomes a fundamental framework for decision-making in economic and social spheres, providing a basis for evaluating the success of different policies and programs in terms of their ability to improve the quality of life of the population.
History: Welfare economics has its roots in the work of economists such as Adam Smith and Alfred Marshall, but its formalization is attributed to Arthur Pigou in the 20th century, who introduced key concepts such as consumer surplus and the analysis of externalities. Over time, different approaches within this branch have developed, including John Rawls’ theory of social justice and the cost-benefit analysis that became popular in the 1960s.
Uses: Welfare economics is used in the evaluation of public policies, where the effects of different interventions on social welfare are analyzed. It is also applied in economic planning, market regulation, and investment project evaluation, allowing policymakers to make informed decisions that maximize overall welfare.
Examples: An example of welfare economics in action is the analysis of public health policies, where the impact of vaccination on disease reduction and increased social welfare is evaluated. Another case is the evaluation of income transfer programs, such as subsidies to low-income families, which aim to improve quality of life and reduce poverty.
