When entering the domain of Welfare Economics, we move from a highly intellectual realm to a very existential one. At its core, this branch of economics grapples with questions that touch the essence of our collective life: Can we form a community where the production of resources is increased and distributed relatively (Bogoeski, 2021)? How can public policy frameworks be designed to cultivate a community where everyone can access equal success opportunities? The plot is based on replacing the Old to New Welfare Economics transition. This transformation illustrates the shift in views on how prosperity should be understood and how the common good can be achieved.
The Basis of Ancient Path of Welfare Economics
Envision the period in the early 20th century, when economies and societies were embracing industrialization change and, at the same time, World War I. In this epoch, visionaries like Arthur Pigou were the trendsetters in old welfare economies. The regulation approached the state as the guardian of society’s well-being, using policies like taxes and subsidies to repair the holes in the fabric of the market-based economy. However, notwithstanding the laudable ambition to achieve this goal, it faced the complexity of human happiness. Critics pointed out that measuring the happiness and satisfaction of different people in each of these lives is an attempt to reduce something very subjective and ambiguous to a single number. How would you rate the contentment of a daughter receiving an education versus a comrade gaining healthcare coverage? These critics, for instance, Robinson, proposed another way of thinking about social welfare, which could be done without utility comparisons among individuals.
The Evolution into New Welfare Economics
In the face of that hurdle, in the mid-20th century, they witnessed the beginning of the New Welfare Economics, an approach aimed at refining the methods and ideas of the preceding. This task was led by people like John Hicks and Paul Samuelson, who championed Pareto efficiency, which states that positive welfare can be achieved without any individual getting worse off (Rooted et al., 2021). In this way, the focus on the policies that could create win-win situations for society was shifted to the rather argumentative issue of happiness measurement. Nonetheless, the new scheme was not perfect; it brought up its own set of questions. Did they, therefore, concentrate so much on efficiency that they forgot about the issues of fairness and equity? For instance, rights or capabilities critics such as Amartya Sen argued that society’s Ty’s welfare is much more ex than a cold calculation of efficiency (Esmer, 2021). They claimed that the actual result of welfare should consider these values of justice, rights, and equality, which Pareto efficiency cannot illustrate.
Bridging Histories with Humanity
The story of Old Welfare Economics to New Welfare Economics is not merely the realm of academic debate. It represents the continuing process of self-discovery of what it means to live together (Singhal, 2023). We have come a long way from the physical remedies proposed by Pigou to the economic approaches championed by Hicks and Samuelson in delivering economic growth. However, we have struggled with the inherent limitations of our tools and broad aspirations for the future. The dialogue between these two approaches is a battle for priorities, values, and the kind of world we want to see.
In the end, Welfare Economics—both new and old versions—tells us that economics is not all about wealth and numbers but also about people and their dreams. In these versions, it is the area that, at its best, strives to understand how nations’ prosperity contributes to everyone’s welfare. One of the valuable lessons offered by Welfare Economics, which is the mixture of critique and aspiration as we tread through the 21st-century challenges, is a great tool to create policies that efficiently act for the common good, binding the efficiency scales to the equity scales with the emblem of our togetherness.
References
Bogoeski, V. (2021). The revision of the posted workers directive as a Polanyian response to the commodification of labor in Europe. Global Perspectives, 2(1), 18740.
Esmer, S. (2021). Amartya Sen‘s capability approach and its relation with John Rawls ‘justice as fairness (Master’s thesis, Middle East Technical University).
Rooted, H. D., His, F. R. I., & Suzumura, K. (2021). John Hicks’s Farewell to Economic Welfarism. Welfare Theory, Public Action, and Ethical Values: Revisiting the History of Welfare Economics, 159.
Singhal, A., & Bjurström, E. (2023). Advancing behavioral economics through positive deviance: Attending to the microworld of second-track processes. Journal of Behavioural Economics and Social Systems, 5(1).
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