Understanding Welfare Economics
Welfare economics studies how resource distribution and economic policies affect people's well-being. It was developed in the 20th century, with Arthur Cecil Pigou being recognized as its pioneer. The field aims to enhance resource efficiency and income distribution to improve societal welfare.
Details of Welfare Economics
As a part of microeconomics, welfare economics studies the impact of resource allocation on people's welfare. It examines the economy's structure, aiming to understand how different economic situations affect social welfare. Welfare economics also plays a role in creating economic policies for collective growth. Efficient allocation and understanding of the welfare system enable economists to evaluate public finance and government policies.
The process of resource allocation is discussed with reference to two theories: the invisible hand theory and government intervention. Keynesian economists support government intervention, while neoclassical economists support the invisible hand theory. In real-world economies, a mix of these approaches shapes resource allocation.