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Thursday, June 30, 2011

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Alan White

Utilitarian welfare maximization is the philosophy behind "standard" economic analysis, i.e. neoclassical economics. Utilitarian because the object of policy is the greatest good for the greatest number, with welfare defined essentially as wealth, or perhaps as utility, defined further as fulfillment of preferences revealed through market transactions. Although I'm not generally a fan, the Wikipedia entry on Welfare Economics is actually not bad.

Brian

What is utilitarian welfare maximization?

Alan White

Brian,

My view is that autonomy, solidarity and utilitarian welfare maximization are all important values worthy of pursuit. Generally I am sympathetic to the human development approach of Amartya Sen, which sees both purely rights-based and purely utilitarian approaches as too extreme, but regards freedom and the development of capacities for the poor and excluded as essential to any utilitarian measure of social well-being.

So in the case of consumer credit the important questions to ask are not whether any regulation increases the supply of credit but whether it actually improves the lives of borrowers and is sustainable for the lenders. My microcredit paper elaborates on my version of welfare economics. I try to avoid standard economic analysis at all costs!

Brian Wolfman

So, you are a case-by-case pragmatist who would often, but not always, apply standard economic analysis to determine whether this or that approach made sense in trying to solve a particular problem or promote a particular value or ideal?

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