Normative Economics and Welfare

Welfarism prioritizes the collective welfare of society over individual welfare.

Pareto efficiency is associated with the work of Italian economist Vilfredo Pareto.

An allocation is considered inefficient if redistributing resources can make at least one individual better off without harming others.

Efficiency in consumption means increasing the well-being of at least one consumer without reducing that of others is not possible.

Pareto efficiency only requires efficiency in consumption.

Welfarist theories suggest that aiming for Pareto improvements is both necessary and sufficient for achieving justice.

Mainstream economics has primarily focused on normative theories concerning just institutions.

Efficiency in production means reallocating resources could increase the production of at least one good without affecting others.

Consumer surplus is defined as the difference between one's maximum willingness to pay and the actual payment made.

The producer surplus is the aggregate difference between the market price and the maximum price consumers are willing to pay.

Every equilibrium in competitive markets is Pareto-efficient according to the First Theorem of Welfare Economics.

The Second Theorem of Welfare Economics suggests that any allocation can be achieved without reallocation of endowments.

Consumer surplus is calculated using integrals over the demand function.

Independence and coercive power are not required for enforcing redistributive policies mentioned in the Second Theorem.

The theory of revealed preference allows us to infer a person's true preferences from their market behavior.

Community surplus is the sum of consumer surplus and producer efficiency.

Consumer surplus is the difference between the willingness to pay and the price actually paid.

The First Theorem of Welfare Economics states that all market equilibria are Pareto-inefficient.

Ego depletion refers to the capacity of individuals to make rational financial decisions without influence.

Allocatively efficient resource allocation means one individual can be made better off without harming another.

The ceteris-paribus condition allows for the analysis of relationships while holding all other relevant variables constant.

Behavioral biases can lead to a gap between actual preferences and revealed interests.

The Second Theorem of Welfare Economics suggests that Pareto-optimal outcomes cannot be achieved through market equilibrium.

Productive efficiency occurs when it is possible to increase the production of one good without decreasing another.