Welfare Economics

Attempts to measure or quantify welfare are subject to a number of difficult conceptual and methodological prob lems, even when the problem is confined to human beings. Economists have argued that market prices provide a measure of the relative value that human beings place on goods (such as food, automobiles, or entertainment) that are easily bought and sold, but concede that other goods (such as health, environmental quality, or community) resist the mechanisms of ordinary economic exchange. Providing such goods may require a degree of cooperative effort that borders on coercion. Furthermore, some people may be effectively excluded from participating in market exchange (either by inequities in law or poverty), and the impact that an activity or good has on their welfare will not be reflected in the market price. Goods having an impact on welfare that is not reflected by market price are referred to as externalities in welfare economics.

The identification, conceptualization, and quantification of health, environmental, or social externalities can be confusing, contentious, and inherently philosophical. Additional philosophical difficulties arise when one attempts to sum or compare impacts on welfare accruing to different parties. Kenneth Arrow (b. 1921) proved an impossibility theorem, showing that it is mathematically impossible to derive an optimal social welfare function (that is, a calculation of the greatest good for society as a whole) from measurements of the welfare of individuals.[1] For these reasons, welfare economics remains one of the most philosophical areas of modern economic theory.[2] Many of these issues carry over to any attempt to understand the welfare of animals.

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