040004 KU Welfare Policies (MA) (2024S)

Aims: Welfare economics proposes methods of providing a social ranking of different ways of allocating resources based on explicitly stated value judgements. The present course covers topics in welfare economic theory and the applied tool kit used to make and evaluate public policy. The aim of the course is therefore twofold. On the one hand, we want to understand the basic challenges associated with moving beyond the Pareto criterion and reconciling individual and collective interests. We look at the common theoretical framework that allows us to understand how different ethical premises (like utilitarianism, or Rawlsian max-min principle) solve this conflict. On the other hand, we want to review some of the practical tools that have been used to guide policy decisions based on welfare aspects.

Contents: Social choice and Arrow's impossibility theorem; measurability and comparability justifications for a Rawlsian, utilitarian or flexible social welfare function; strategyproofness and the Gibbard-Satterthwaite theorem; basic controversies in applied welfare economics (Marshall, Kaldor, Hicks, Scitovsky, Samuelson); equity, fairness, and envy; welfare measurement (consumers' and producers' surplus, Hicks' compensation and equivalent variations, willingness to pay, aggregation, cost-benefit analysis).