Assumptions and Limitations of Welfare Concept
We give below a few assumptions on which the welfare concept rests Memorability of Utility. The Carly welfare economists assumed that utility was a quantifiable quantity and people’s satisfaction could be measured. Man’s economic welfare is said to be a sum of total of his satisfactions. Also welfare of individualist could be added to arrive at total social welfare. But there is no objective measurement of a person’s satisfaction since it is just a state of mind. Hence according to some critics welfare economics is hypothetical and lacks scientific character. Inter personal Comparisons. We have said
that social welfare can be increased by making some one more satisfied without making anyone less satisfied. But we can assess the increase in welfare only if we compare satisfaction of one with that of other. Pious implicitly assumed inter personal comparison but trenchant criticism by Professor Robbins made the economists aseptically. Later writers as we have seen have attempted to formulate welfare theory independently of inter personal comparison of satisfaction. This had led some economists o hold that inter-personal comparisons of satisfaction or happiness are illegitimate or unscientific. cannot believe says Robbins that it is helpful to speak as if inter-personal comparison of utility rest on scientific foundations Thus assumption of inter personal comparability of satisfactions imposes a serious limitation on welfare analysis
Concept of Maximum. Welfare analysis ‘assumes that there is a determinate maximum. But actually there may be·several optima or points of maximum satisfaction. Economic theory has concerned itself with the movement from a lower to a higher optimum. Economic welfare concerns itself with a single optimum
Consumer’s Preferences. It is assumed that consumer’s preferences are independent of prices or other hanged. This assumption is not realistic. The consumer’s preferences are bound to be affected by hanged in prices or say changes in fashion. But the welfare economist says that if new indifference curves have to be drawn consequent on a change in price the diagrams of indifference maps melt into chaos.