Welfare Economics

After the publication of the two major but rather negative textbooks by Little (1950) and Graaff (1957), welfare economics seemed to lie mostly dormant and sterile during the 1960s. Since 1970, however, welfare economics has undergone a major change. Yet the progress made is not really fully reflected in any new textbook, even though the second part of Atkinson and Stiglitz (1980) and the book by Guesnerie (1980) in French do cover important aspects. Also, the excellent volumes of readings collected by Arrow and Scitovsky (1969), Farrell (1973) and Phelps (1973) appeared too soon to reflect more than the very earliest stages of the new work. Thus the newcomer to welfare economic theory is often forced to seek his own way through the vast number of articles published since 1970, and very often will fail to see that the total progress made is really more than the sum of the new ideas. He will be in very good company too, since most professional economists, including some of those who helped to bring about the changes, have also failed to appreciate just how different modern welfare economics has become. Indeed, many implications of the new work may still remain hidden from all of us, for all we know, such is the scope of the change.