Friday, May 9, 2008

Values are important

Today's lecture was about Welfare Economics and how microeconomic policy making involves some form of intervention in the daily lives of people by changing the relative prices of things.

And we came to this section about the assumptions we make about society as whole. The following are the stock standard assumptions behind any analysis of social welfare. They are not meant to be realistic but under these conditions we can have an idea of the 'perfect' or model and see how far we deviate from that.

1. Individualism

(We assume that a person's improvement of happiness is vital to his well-being. We prefer them to be happier or remain as happy. The person and a positive state of mind is important.)

2. Non-paternalism

(We assume that nobody knows the person better than himself. Therefore, by implication we cannot pass judgment or force or constrain a person or prevent a person from doing something.))

3. Benevolence

(We assume that we disregard what the individual's relative endowments and level of utility. And that what's important is that there is an increase in that individual's utility.)

4. Process independence.

(We assume that we disregard the mechanism with which we allocate welfare.)

The basis for all our judgments and the desired implementation of a policy should not be based on efficiency alone. In fact, a lot of values, principles, codes of conduct and ethics comes into play.

As a nation, we prefer the rich not to get richer because that wouldn't be fair.

We would like to be allowed to do whatever we want, but we need to take into consideration and respect other people's feelings and opinions and views.

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