1 Welfare

Apuntes

1 Welfare Economics and Economic Policies: Lecture Notes Blanca Zuluaga1 Daniela Estrada2 1. Introduction The following lecture notes were specially written for undergraduate economic policy course students. We expect them to be helpful, as welfare economics and the theory of public choice provide fundamental theoretical elements for analyzing, elaborating on, and evaluating economic policies. The document has 5 sections. The first defines welfare economics and its objectives. In the second part, the measurement of well-being is discussed. The third section explores different criteria for evaluating the desirability of an economic policy or the change from one state of the world to another. In particular, we analyze the Pigou-Marshall approach, the Pareto approach, the Kaldor- Hicks compensation test, and the Scitovsky reversibility test. The fourth section presents the social welfare functions and how they can be used to evaluate the desirability of politics; here, we concentrate specifically on the Rawlsian and utilitarian functions. In the fifth section, two topics of collective choice theory related to decision-making for improving well-being are analyzed: Arrow's impossibility...