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Unit-25: The Social Welfare Function

curve W . In the diagram, point E clearly shows the maximum social welfare state or Bliss point. Notes
1
Constraints of given technology and fixed quotation of inputs whatever with the given technology
and constraints of fixed quantities of inputs with society whatever the welfare combinations are
obtained E is the maximum society values. Point L lies the lower welfare curve W and expresses
low level of social welfare where point C situated in W is outside utility frontier of society FF .
1
2
So the point E expresses the maximum social welfare.
Fig. 25.1

C
F L
B's Utility E W 2

W W 1
O F
1
A's Utility

Social welfare function is the function of ordinal numerical indication of social
welfare and individual utility.

Its Assumption—Bergson’s social welfare function is based on some assumptions—
1. This theory assumed that social welfare is dependent on income and capital of every individual and
welfare of each individual depends on his personal property and income as well as the distribution
of welfare of the members of the society.
2. It acknowledges the presence of outer economy and diseconomy and their effect in present.
3. It is based on ordinal numeric ranking of combinations of variables affecting the individual welfare.
4. In this function, the interpersonal comparisons of utility, in which price decision includes, are found.
Its Criticisms—With these assumptions, the social welfare function according to Prof.
Samuelson “becomes as broad and empty as essential language.” Other economists welcomed it
as “major contribution in welfare economics”, where the opinion of Dr. Little “completes formal
mathematical settlement of welfare economics.” Sketovosky believes it as “totally ordinary” and
his aim is to identify the formal and rigorous restatement. For instance incorporating of social
welfare function can remove the uncertainty found in Pareto Optimum. But this function has also
some limitations.

Expresses your views on Bergson’s social welfare.

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