Introduction

Abstract

Welfare economics is a very important branch of economic theory. It serves as a foundation to many applied (relatively speaking) branches of economics such as public finance, cost-benefit analysis, and the economics of government policy in many areas including international trade, industry and welfare (social security, etc.). Recently, even macroeconomics is beginning to assume a microeconomic foundation and become subject to a welfare-theoretic analysis (e.g. Phelps, 1970, 1972). The increasing importance of welfare economics admits of scarcely any doubt.