Abstract
To start our enquiry, let’s consider, in its fundamental elements, what theoretical welfare economics says about inequality and poverty. Social welfare is considered a function of individual and family incomes, since incomes have a meaningful and positive correlation with indexes of a good life, such as life expectancy at birth, health, food, housing, education, …, while consumptions are a more limited economic variable.
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Notes
- 1.
See Arrow and Scitovsky (1969) collection of essays by leading scholars on welfare economics.
- 2.
The preface briefly justifies this choice instead of considering (ordinal) utilities. Section 1.2 further considers this point.
- 3.
Of some interest is the so called “Attali Report” (2008) on the problems that a mature and developed economy (France) must face to enhance its development.
- 4.
A very old maxim says: Homo sine pecunia imago mortis.
- 5.
While in a theoretical framework the notion of “income” can be considered as a well specified entity, in applied economics “income” is a very elusive notion. For a thorough discussion of this notion Kaldor (1955, pp. 54–78) is still interesting and useful reading. Another (still) authoritative study on the notion of income and its measurement is Fisher (1937).
- 6.
Currently, it is under debate whether in real world economies, P.A. employees sometimes act in their personal interest.
- 7.
The so called Condorcet paradox is a well known example of Arrow’s general impossibility theorem. In some sense, the paradox proves the theorem in the simple form here presented.
- 8.
In the last 20 years, social choice theory has received increasing attention in literature on political economy. Though it is not considered in this monograph, the interesting contribution made by Ticchi and Vindigni (2009) is worth mentioning.
- 9.
This maximization entails problems of information incentive and performance; for further details see Reiter (1986).
- 10.
From a social and political viewpoint inequality and justice are interrelated human conditions. Rawls (1971) has much to say on this point; suffices here to quote him, when he states that justice is “…the basic structure of society”.
- 11.
From the American statistician Lorenz (1905).
- 12.
Note that H is independent of any welfare function. It is entirely based on statistical data.
- 13.
In economics, production is normally the result of applying many factors of production to a so called production function; thus, one starts from a vector of inputs to get a vector of outputs. In the model here presented, we do not consider physical inputs, we directly assume that these factors are bought by individual incomes and transformed into outputs measured by a scalar, i.e. social production.
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Nicola, P. (2013). Overview. In: Efficiency and Equity in Welfare Economics. Lecture Notes in Economics and Mathematical Systems, vol 661. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-30071-4_1
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