Walras's model served as a starting platform for numerous and diversified studies by subsequent generations of economists. Including one of the branches of his theory of general equilibrium is the “new” economic theory of welfare.

The Italian economist V. Pareto expanded the Walrasian understanding of equilibrium to include the need to achieve equal welfare for all subjects of market relations.

According to M. Blaug, Pareto's research represents a watershed in the history of the subjective theory of well-being 2 . His predecessors, starting with I. Bentham, traditionally viewed “welfare” as the sum of quantifiable utilities extracted by all members of society from their income (cardinalist approach).

Before moving on to presenting Pareto's views, we will make some comments. First, welfare theory, more than any other branch economic theory, is associated with ethical assessments. The normative approach ("how it should be") plays into this topic according to at least no less a role than the positive (“as it really is”). Secondly, the concept of Pareto optimal distribution of goods and resources is based on subjective value judgments. It is believed that no one can judge better than the person himself what is beneficial for him, what is good and what is bad. There is no need to measure and commensurate utilities; it is enough to rank combinations of individuals’ well-being by preference (ordinalist approach).

So, the state of the economy is considered Pareto-optimal (or Pareto optimal) if production and distribution cannot be changed in such a way that the welfare of at least one person increases without reducing the welfare of at least one other. The following graph can serve as an illustration of the Pareto criterion (Fig. 9.2).

It is quite acceptable to assume that society consists of two consumers, for example, Tryphon and Fedor, whose level of well-being will be plotted on the axes of Cartesian coordinates. The conclusions that we will draw when analyzing such a “bipolar society” can be quite correctly extended to all consumers taken together.

Rice. 9.2.

Any point in the space between the coordinate axes reflects a certain combination of the welfare of Tryphon and Fedor. The well-being of any person is determined by the level of consumption of goods and services, and their production at any given time is limited. The distribution of goods among consumers provides each with a certain level of well-being. When moving to the right, Tryphon's welfare increases, and upward - Fyodor's. Since the total production of goods and services is always insufficient to satisfy all the needs of all consumers, a significant part of their wealth combinations will be left behind. the border of possible well-being(dots R, 5, A, d) - The extreme points of this boundary are located on the axes. Point 0 F (“zero” welfare of Fedor) reflects the situation when all goods go to Tryphon and his welfare is maximum. The opposite extreme point 0 T corresponds to the “zero” welfare of Tryphon with the maximum welfare of Fedor.

All combinations of welfare lying within the boundaries of the sector O, 0 T, Of are achievable, but do not correspond to the effective distribution of benefits between consumers (points 7, U, etc.). Through mutual exchange, it is possible to achieve an increase in the welfare of at least one of the consumers without (at a minimum) worsening the situation of the other.

And only at the border of possible welfare is an effective distribution of goods achieved, which cannot be improved within the framework of the criterion proposed by Pareto. In other words, all combinations lying on the border of possible welfare are Jareto-optimal.

Parsto-preferred states should be distinguished from Pareto-optimal states. Take, for example, the welfare combination corresponding to point Z. All combinations lying above and to the right (shaded sector), while not optimal, will be better than combination Z, since the transition to them will improve the welfare of at least one of the consumers without worsening the situation of the other (or both can win).

It should be noted, however, that the Pareto criterion is not universal. It does not allow us to assess the situation when, as a result of changes in the distribution of goods, the satisfaction of one of the consumers increases, while the satisfaction of the other decreases. An example of such a situation would be, for example, the transition from a combination at point Z to a combination at point Y. To assess the nature of changes in such cases, use Kaldor criterion. According to this criterion, a change in the distribution of benefits should be considered positive if those who benefit from redistribution value their “gain” higher than the amount that “losers” consider their loss.

For an economy to achieve a “Pareto optimal” state, three conditions must be met:

efficiency in exchange (achieving optimal distribution of benefits between consumers);

efficiency in production (technological efficiency); optimality of the output structure (simultaneous efficiency in exchange and production).

An economy that has not reached the Pareto optimum will be considered inefficient. Let's consider each of the listed conditions in more detail.

First condition in expanded form it sounds like this: if the volumes of consumer goods are fixed, then the state of the economy can be considered efficient in exchange in the case when it is impossible to redistribute goods so that someone gets better, but no one gets worse.

The achievement of the first condition can be traced using an Edgeworth diagram (“box”) for two consumers in the space of two goods.

As before, we will assume that the whole society consists of two consumers - Tryphon and Fedor. Economic relations between them arise regarding the distribution of only two goods, for example, clothing ( WITH , clothes) and food (F, food).

The diagram is constructed on the basis of two maps of indifference curves of Trifon and Fedor, who consume the entire (limited) amount of clothing and food (but 12 units of both) (Fig. 9.3).

Rice. 9.3.

A - Tryphon; b- Fedora

Obviously, in the absence of a “competitor,” each consumer would take all the clothes and all the food for himself (the “non-saturation” axiom). However, in this situation, the interests of both consumers must be taken into account. Since we are talking about the same limited quantity of two goods, this can be achieved by superimposing one graph on the other, but the second graph must be flipped 180°. This is how Edgeworth's first “box” is obtained (Fig. 9.4).

Any point inside the resulting “box” will reflect one or another specific distribution of clothing and food between Tryphon and Fedor and belong to some (even if not indicated on the graph) indifference curve everyone from consumers. Suppose the initial distribution of two goods corresponds to the point X(8 units of clothing and 1 unit of food from Tryphon

Rice. 9.4. Efficiency in Exchange (Edgeworth's First Box)

and 4 units. clothes and 11 units. food from Fedor), which is simultaneously on the 1st indifference curve of Tryphon and the 2nd indifference curve of Fedor. However, such a distribution of goods is not efficient.

For example, dot at means such a distribution of two goods that is preferable for Tryphon (point at lies above its 1st indifference curve) and is equivalent to the distribution at the point X for Fedor (X And at belong to one - the 2nd indifference curve of Fedor). To distribution at You can go if Tryphon, who has a lot of clothes and little food, and Fedor, whose situation is the opposite, agree on an exchange. The slope of the tangents to the indifference curves of Tryphon and Fedor at the point X different, which indicates their different preferences with such a distribution of benefits. Tryphon prefers food, of which he has little, to clothing, of which he has a lot. Fedor's preferences in this situation are the opposite. All this corresponds to Gossen’s first law - the law of decreasing marginal utility. So, at the point X Trifon and Fedor have different maximum norms for replacing one product with another:

From point l* it is also possible to move to point z, in which both will benefit, since the new distribution lies on higher indifference curves for both consumers (depicted by the dotted line).

Let's continue the analysis. Although the distributions of two goods at points at And z and is preferable to distribution at a point X, they are not effective because they too can be improved. For example, the distribution at point IN will, in turn, be preferable to distribution at the point at(since Tryphon will win, and Fedor will not lose).

It is easy to verify that any points that lie on intersection indifference curves are not the optimal distribution of goods (the marginal rates of substitution for two consumers do not coincide). And only at the points of tangency of the Trifon and Fedor indifference curves will an optimal state be achieved in the distribution of two goods (“efficiency in exchange”), from which it is impossible to leave without worsening the situation of at least one of the consumers. The slope of the tangents at the points where they touch the indifference curves will be the same and they will coincide. This will mean that at the points of contact, with the effective distribution of two goods, the marginal rates of substitution of one good for another for both consumers will be equal:

There can be quite a lot of such points within the Edgeworth “box”. Connecting them with a common line, we get contract curve (0 T LVO0 f). Although all points along this line are efficient in distributing goods among consumers, this does not mean that they are equal from the point of view of each consumer. When moving along the contract line to the right upward, Tryphon's welfare increases and Fedor's welfare decreases. When moving backwards, it's the other way around. The only “consolation” can be that during the transition from one effective state to another (i.e., when moving along the contract line), an improvement in the position of one of the consumers is accompanied by a minimal deterioration in the position of the other.

Summarizing the analysis of the first condition of Pareto optimality, we can write that a sign of the effective distribution of goods between consumers is the equality of the marginal rates of substitution of goods for any number of consumers (up to the last, say “Jacob”):

Let us pay attention to the fact that in our specific example:

This means that with a distribution corresponding to the point L, and Trifon and Fedor prefer clothes to food in a ratio of 2 to 3 (i.e., for 3 additional units of food, they are both willing to part with 2 units of clothing). At the point IN food and clothing are of equal value for them (1:1). When distributed according to the point D food is already preferable to them than clothing (they are ready to give 3 units of clothing for two additional units of food). In Fig. Figure 9.2 shows a contract line deployed in Cartesian coordinates, along the axes of which the welfare levels of Tryphon and Fedor are plotted with the border of possible welfare 0 T 0 F.

Second condition Pareto optimality is formulated as follows: if the volumes of production resources are fixed, then the state of the economy can be considered efficient in production (technologically efficient) when it is impossible to redistribute the available resources in such a way as to increase the output of at least one product without reducing the output of any other product.

As when considering the first condition of Pareto optimality, we introduce restrictions. We will assume that there are only two enterprises on the market - a sewing workshop (III) and a farm (F). To produce its products (clothing and food), each enterprise uses two limited resources: labor ( L) and capital (TO).

Of course, in in kind(machines, raw materials, etc.) the capital of a sewing workshop will differ significantly from the capital of a farm. Yes and work force, used in every enterprise, is not capable of complete interchangeability without additional retraining. However, since primary form the cost of production is money (the universal form of capital), to the extent that competition between these two different enterprises for the possession of limited resources is quite acceptable.

The sign of Pareto optimality in production, obtained by analyzing the situation with two enterprises and two resources, subsequently, as in the first case, can be quite correctly extended to any number of production resources and any number of enterprises.

As in the first case, we will construct Edgeworth’s “box” in the same way, only instead of maps of indifference curves of two consumers we use maps of isoquants (lines of equal products) of two enterprises (Fig. 9.5). Total resources: 8 units. capital and 8 units. labor.

Any point inside this Edgeworth “box” will correspond to a very specific distribution of two resources (labor and capital) between the sewing workshop and the farm. And at the same time, any point will be a certain combination of the output of two goods - clothing and food, owned simultaneously by two isoquants (workshop and farm). For example, dot N belongs simultaneously to the isoquant of the garment factory (C = 12) and isoquant trusses (F= 8). This means that when distributing resources, 7 units. capital and 3 units. labor at the sewing workshop and 1 unit. capital and 5 units. of labor from the farm, 12 units will be produced simultaneously in society. clothes and 8 units. food.

Rice. 9.5. Efficiency in production (second Edgeworth box)

Using arguments similar to those given in the first case, it is easy to prove that all points lying at the intersection of isoquants are not an efficient allocation of resources. By changing these distributions, it is possible to achieve an increase in the output of at least one product without reducing the production of another. For example, when moving to resource distribution at a point WITH(4 units of capital and labor for each enterprise) you can increase the output of food to 12 units without reducing the output of clothing (12 units). The limiting rates of technical replacement, determined by the slope of the tangents to the corresponding points on the isoquants, do not coincide for the points of intersection of the isoquants. By consistently improving the structure of resource distribution between two enterprises, it is possible to achieve a situation where it becomes impossible to further increase the production of one of the products without reducing the output of at least one other (the combination of output at the point WITH is such a situation). Obviously, the points of tangency of the isoquants will meet this condition. By connecting all such points with a common line, we obtain the production possibilities curve O^CHNOr, or, in other words, a contract production line. It brings together all technically efficient combinations of resources. However, this does not mean that all these combinations are equivalent from the perspective of both enterprises. When moving to the right up the contract line, the output of the sewing workshop increases and the production of farm products decreases. With a downward movement, the picture is the opposite.

When moving along a contract line (i.e., when moving from one efficient allocation of resources to another), an increase in the production of one of the goods is accompanied by a minimal reduction in the output of another.

At the points of tangency of isoquants, the slopes of the tangents to them are the same, and the tangents themselves coincide. This means that with efficient allocation of resources, the maximum norms for the technical replacement of one resource by another for both enterprises are the same:

This rule, as already mentioned, can be extended to the situation with any number of enterprises using any set of resources.

Note that in our specific example, at all three selected points of tangency of the isoquants (E, S, N) the marginal rate of technical replacement of one resource by another is equal to -1. This means that for any noted efficient allocation of resources for both enterprises, one unit of capital is equivalently interchangeable with one unit of labor.

To achieve a Pareto-optimal state of the economy, compliance with each of the previous conditions separately is not enough. Until efficiency is achieved in the output structure, it is possible to improve it so that the welfare of at least one of the consumers will increase, and of any of the others, but at least not worsen.

Third condition Nareto-optimality can be formulated as follows: the structure of output is optimal if by changing it it is impossible to increase the welfare of at least one consumer without reducing the welfare of others.

To analyze this condition, we construct a production possibilities curve using data from Edgeworth's second “box.” Let's place the contract curve 0 s ESN0 g in Cartesian coordinates, where the volumes of manufactured products are plotted along the axes: clothing and food (Fig. 9.6).

All points on this line represent different combinations of clothing and food that can be produced most efficiently given fixed amounts of labor and capital. Point 0^ represents one extreme case, when only clothing is produced, and point 0 C represents the other, when only food is produced. All points lying inside the O^OO^ sector reflect possible, but not optimal, combinations of clothing and food production. Combinations located outside this sector (above or to the right of this line) are unattainable with the limited resources available and the technologies used. All this allows us to conclude that the curve of production contracts unfolded in Cartesian coordinates represents, in fact, the production possibilities frontier. Moving along the production possibilities curve, it is possible, by redistributing production resources, “transform” one product into another, i.e. change the structure of output - the ratio between food and clothing.

Rice. 9.6.

Note the upward convex shape of the production possibilities frontier and its negative slope. The negative slope is due to the fact that when resources are used efficiently, increasing the production of one good (e.g., food) requires shifting factor inputs away from the production of another good (clothing). As a result, production of that other good decreases. The upward convexity of the production possibilities frontier is explained by the fact that the marginal productivity of redirected resources decreases as they increasingly switch from the production of one good to the production of another.

In other words, the release of each subsequent (additional, marginal) unit of one good is possible only due to an increasing reduction in the production of another good.

The process of "transforming" one product into another can be described using maximum rate of product transformation (MRPT, marginal rate of product transformation).

The marginal rate of product transformation shows how much of one product must be “sacrificed” to obtain an additional unit of another product.

Thus, the maximum rate of transformation of clothing into food for any point

is determined by the relation:

The maximum rate of transformation of food into clothing is:

Where AC = 1.

The marginal rate of product transformation can be expressed in terms of production costs.

The marginal cost of increasing food by one unit ( MSr) is essentially a “victim” of another product - clothing (AC), i.e. MSr = AC.

In turn, the marginal cost of increasing clothing production by one unit ( MS c) equal to the volume of food output (A/ 7), which must be sacrificed to redistribute resources in favor of clothing production, i.e. MS with= A/ 7.

Taking into account the above reasoning, it turns out that:

In geometric interpretation MYART equal to the tangent of the tangent to the production possibilities frontier at the corresponding point, taken with a minus sign.

Let's continue our analysis. Although all points on the production possibilities frontier are technologically efficient, not all of them correspond to the output of goods that is most desirable (efficient) from the perspective of both consumers.

Suppose the initial structure of production of two goods corresponds to the optimal point E(15 units of food and 8 units of clothing are produced).

Let's place Edgeworth's first “box” in the last graph, compiled, as we remember, from the maps of Trifon and Fedor’s indifference curves (Fig. 9.7).

Let us also assume that the initial distribution of products between two consumers corresponds to the optimal point IN. With a given production structure, Tryphon will have 6 units. clothes and 6 units. food, and Fedor has 2 units. clothes and 9 units. food.

In Fig. 9.7 it is clear that the tangents to the points IN And E have different slopes, which means that parallel rates of replacement of one product with another V Tpi-

von and Fedora are equal<

but are not equal to the maximum rate of product transformation, i.e.

By changing the structure of production (from the structure at the point E to the structure at a point C: (C= 12 units and / 7 = 12 units)), it is possible to improve the well-being of one of the consumers without at least worsening the situation of the other consumer. Let's prove it.

With the new production structure, Trifon will still have 6 units at his disposal. clothes and 6 units. beggars, i.e. his situation will not worsen. For Fedor, the transition to a production structure corresponding to the point £ will result in a loss of 3 units. food. But in return he will receive 4 units. clothes. Since for Fedor, as for Tryphon, at the point IN 1 unit food equals

1 unit is valuable. clothes

insofar as the exchange will bring Fedor a net gain in welfare in the form of one “extra” piece of clothing.

At the point WITH the slope of the tangent to the production possibilities frontier coincides with the slope of the tangent to the indifference curves at the point IN. Therefore, in this case, the marginal rate of product transformation is equal to the marginal rate of substitution of one product for another for both consumers:

An attempt to once again change the structure of production, for example, in favor of the production of clothing (point //), will worsen Fedor’s position, since for 3 additional units. he will have to “give back” 4 units of clothing. food, and if it is of equal value, 1 unit. food and 1 unit. clothes - this will mean a “net” loss in the form of 1 unit. food.

And the slope of the tangent to the point // will not coincide with the slope of the tangent to the point IN, those.

since at the point N -

From all the above reasoning, we can conclude that by consistently improving the structure of production, it is possible to achieve a state of the economy where further changes in the structure of output are not capable of increasing the welfare of at least one of the consumers without reducing the welfare of at least one other. This is the third condition of Pareto optimality.

A sign of compliance with this condition is the equality of the marginal rate of product transformation to the marginal rate of substitution of one product for another for any number of consumers:

In a similar way, the search for the optimal output structure would be carried out with a different effective distribution of benefits between consumers (for example, at points A or ABOUT). Naturally, in these cases, a different output structure than the structure corresponding to point C will be optimal.

• In principle, E. Barone was the first to consider a similar situation back in 1908. However, the solution to this problem became widely known only after the publication in 1939 of the works of N. Kaldor and J. Hicks on “compensation payments”: “A change that benefits some people but causes harm to others can be considered an increase in general welfare if The winners can compensate the losers so that the latter voluntarily accept the change; after compensation payments are made, the winners are better off and the losers are not worse off." Cm.: Blau/ M. Economic thought in retrospect. P. 543.

This result is often called the first theorem. The second theorem of welfare economics states that if individual preferences are convex, then every efficient allocation (every point on the contract curve) is a competitive equilibrium for some initial allocation of goods.

In human history and in the history of economic science, problems of distribution, considered as ethical, - problems of implementing the principles of justice, first came to the fore. Therefore, initially the theory of welfare was considered as a theory of fair distribution, and only later, with the widespread development of market relations, in the theory of welfare the emphasis was placed on production, where factors of economic growth simultaneously became factors in the growth of well-being and prosperity.

In addition, Hobson believed that to maximize welfare it is necessary to be able to compare the degrees of satisfaction received by different people. And this is his fundamental difference from V. Pareto, who considered interpersonal comparisons of utility to be both unnecessary and impossible. Agreeing that this was extremely difficult, Hobson, within the framework of welfare theory, proposed shifting the emphasis to the area of ​​comparing the usefulness of goods with the burden of their production.

There is no doubt that a welfare theory that does not include ethical issues is flawed. A true theory of welfare should invade rather than avoid the subject of applied ethics. Therefore, in the following presentation, emphasis will be placed on the ethical aspects of this theory.

Of course, the achievement of well-being, considered from an ethical position, cannot but include as a component the implementation of the ideals of justice. Have these ideals changed over the centuries and what is the role of these issues in economic theories of welfare? This essay is devoted to this problem.

The proposition of equality of satisfaction certainly relates to the ethical aspects of the problem under consideration, and the ethics of redistribution associated with this process is an essential element of welfare theory. Ideally, in its logically complete version, welfare maximization, based on the principle of equality of satisfactions, presupposes equality of income. True, as already noted, with one very important and completely not obvious assumption, assuming the sameness of individual utility functions of income. Indeed, if the utility functions of different people are the same, and this means nothing more than the ability of different people to extract the same pleasure from an equal unit of income, then the greatest sum of the total happiness of all is achieved only with an equal distribution of income. However, many believe, and not without reason, that the utility functions of different people are by no means the same, and the ability to extract utility from different people varies significantly. And if the capacity for pleasure of a person with refined tastes is much higher than that of an ordinary person, then in this case it is income inequality that is a necessary condition for maximizing the amount of overall happiness.

By the way, if we turn to the dominant theories of welfare developed within the framework of the neoclassical direction of economics, we will see that the goal of economic development is to achieve a maximum amount of subjective satisfaction; income is considered as a means of consumer satisfaction, and the final product of the development of society, as noted, is considered to be high level of personal consumption.

In addition, representatives of the neoliberal trend note that the implementation of the central thesis of welfare theory is the greatest happiness for the greatest number of people, which can be interpreted as a requirement to strive for the greatest universal

As has been repeatedly noted, A. League paid great attention to this problem in his work, analyzing situations when the activities of an enterprise have so-called external effects, which do not have a monetary measure, but actually affect welfare (see essay 5).

The system of value ideas, expressed, among other things, in economic culture, also ensures a certain agreement regarding the goals of society, which should exist under any social system. Note that welfare theory should also influence the formation of social consent, giving clarity to the goals of economic policy. As has been repeatedly noted, achieving well-being presupposes a clear awareness of what goal or good we are striving for. Economics cannot answer this question, since it deals not with basic (in Tugan-Baranovsky’s terminology), but with derived values.

There is an obvious intellectual opposition between the two views of the capitalist system. A. Smith's view prevailed in microeconomics, one of the foundations of which was the fundamental theorem of welfare economics about the efficiency of competitive markets, formalizing Smith's "invisible hand" hypothesis, while unemployment problems were the focus of a separate discipline - macroeconomics. The tension between the approaches has been attempted to be resolved in three ways.

Debray, considered the founders of welfare economics

In general, the topic of institutional research is quite extensive. It includes the theory of consumer demand, socio-economic theory of welfare, analysis of large corporations and a number of others. Economic sociology was developed by one of the predecessors of modern institutionalism - Max Weber (1864-1920). He substantiated the methodological principles of sociology, prepared the fundamental work Economy and Society, which summarized the results of his sociological research. 1. Subsequently, economic sociology received its greatest development in the works of American institutionalists, in particular, the social aspects of international

The works of Western classical economists, neoclassical economists, Keynesians, monetarists, and institutional economists, translated into Russian, were also used. Let us note the most important of them, namely A. Smith. A study of the nature and causes of the wealth of nations. M., 1962 A. Marshall. Principles of Political Economy. M., 1983 J.B. Clark. Wealth distribution. M., L., - 1934 A, Pigou. Economic Theory of Welfare. M., 1985 E. Boehm-Bawerk. Fundamentals of the theory of the value of economic goods. L., 1929 J. Robinson. The Economic Theory of Imperfect Competition. M., 1986 J. Hicks. Cost and capital. M., 1988 E. Chamberlin. The theory of monopolistic competition. M., 1959 J. M. Keynes. General theory of employment, interest and money. M., 1978 I. Schumpeter. Theory of Economic Development. M., 1982 L. Harris. Monetary Theory. M., 1990 J. Galbraith. Economic theories and goals of society. M., 1976 B. Seligman. Main currents of modern economic thought. M., 1968 F. Hayek. Detrimental arrogance. M., 1992 Y. Kornai. Deficit. M., 1989 I, Kornai. The path to a free economy. M., 1991.

This is especially characteristic of classical political economy. A. Smith, like1 and other representatives of this trend with his philosophy of selfishness and individualism, in the theory of welfare emphasized production, considering welfare to be synonymous with wealth. At the same time, wealth is viewed from a macroeconomic perspective, from the angle of increasing the wealth of the nation. In turn, the latter comes down to the products of material production. Within these ideas, the basis and source of well-being is the accumulation of national capital, and the indicator of the level of well-being is the growth in the amount of goods per capita or the net income of the nation, which functionally depends on the resources of capital, land and labor. Consequently, factors of economic growth, the most important of which were the accumulation of capital and division of labor, automatically became factors in the growth of well-being. The classics unanimously considered a system of natural freedom to be a prerequisite for the growth of national wealth. This is not surprising, since the policy of non-intervention by the state (natural freedom) arose from the concept of self-interest. After all, if everyone’s selfish interest ultimately leads to the good of society, it cannot be restrained1. And it is precisely the recognition of beneficence

The question of maximizing welfare is largely a philosophical question. It is no coincidence that modern theories of well-being are based on the principles of utilitarianism - an ethical theory that recognizes the usefulness of an action as a criterion of its morality1. It was the philosophy of utilitarianism that became the initial moral and ethical premise of modern concepts of well-being.

In conclusion, we note that Pareto in his theory of welfare excludes from consideration such issues as interpersonal comparison of utility. This means recognizing the impossibility of answering the question of who is happier—person A or person B—let alone determining how much happier one is than the other. And thus, as it seems at first glance, this approach excludes value judgments when solving this problem. Nevertheless, value judgments are still present in Pareto’s theory of welfare. They boil down to this

But no matter how logical and convincing Pareto’s line of reasoning may seem, it is difficult to dispute the position that the optimal, according to Pareto, is very often socially unacceptable1. Therefore, even in line with the neoclassical direction of political economy, other theories of welfare are being formed. These problems are the subject of the work of the famous English economist, representative of the Cambridge school A. Pigou, which is called the Economic Theory of Welfare.

Pigou set out to find a convenient practical tool for measuring well-being and with its help to explore those most important groups of factors that affect the economic well-being of modern societies. Pigou wanted to find out not the quantitative side of well-being, but how its value depends on those factors that are brought into play. available to government officials. Pigou based his reasoning on the following premises:

Before A. Pigou, the theory of welfare had already gone through several stages in its development.

The classical school considered welfare as a synonym for wealth, understood as products of material production, and considered the accumulation of national capital and the division of labor to be the source of well-being; the indicator of the level of well-being was the increase in the amount of goods per capita or the net income of the nation. Thus, they examined social welfare by looking at problems at the macroeconomic level. Marginalists (Austrian and Lausanne schools) placed the focus on individual well-being, which was determined by the preferences of the individual and the presence of conditions for making a rational choice. Pareto formulated the principle according to which maximum welfare is achieved with optimal allocation of resources, when any redistribution does not increase utility in society. According to this approach, increasing welfare is possible only in conditions of free competition.

According to Pareto's views, perfect competition will ensure the maximization of the utility function throughout society. However, at the beginning of the twentieth century, certain doubts arose about the truth of this position. In this regard, it is worth mentioning the views of the English economist G. Sidgwick (1838-1900), who for the first time began to consider such concepts as wealth and well-being both from the position of society and from the position of the individual, emphasizing that the same concepts have different meanings depending on whether we look at them from a social or an individual point of view. Therefore, for Sidgwick, the accumulated stock of material resources (which was synonymous with wealth among the classics) and the wealth of society, its real income, are by no means the same value.

As is known, within the framework of the classical school of political economy, A. Smith’s position was an axiom that each person, while pursuing his own benefit, simultaneously serves the interests of society (this is the essence of the principle of the “invisible hand”). Sidgwick cites simple, now textbook examples of the discrepancy between private and public benefits and concludes that to effectively solve many types of production problems, government intervention in one form or another is required. According to Sidgwick, the shortcomings of the system of “natural freedom” are manifested in an even more prominent form in the distribution system and excessive income inequality. Anticipating twentieth-century economists, he writes that a more equal distribution of created wealth increases overall levels of well-being.

A. Pigou - English economist, representative of the Cambridge school (1877-1959).

A. Pigou considered the approach of his predecessors to be insufficient due to the existing “market failures”, or non-market relations, as well as due to the existence of monopoly and monopolistic competition, which inevitably cause a gap between public and private interests. Pigou’s main work, “The Economic Theory of Welfare,” is devoted to the development of the neoclassical theory of welfare.

Pigou set the goal of his research development of practical tools for ensuring well-being based on the premises of neoclassical theory: the theory of diminishing marginal utility, the subjective psychological approach to the assessment of goods and the principle of utilitarianism. It can rightfully be said that Pigou completed the creation of the neoclassical theory of welfare.

According to A. Pigou, well-being “means how well a person feels or the degree of his satisfaction.” Pigou distinguished between general and economic well-being. Economics studies specifically economic well-being, which includes only those elements that can be measured using a monetary standard. General well-being, in contrast to economic well-being, which is directly related to income level, includes a wide range of elements that do not have a monetary value. For example, general well-being includes, in addition to economic, the nature of work, the state of the environment, relationships between people, position in society, living conditions, public order, etc. According to Pigou, there is a close connection between economic and general well-being, at least , in developed countries.

A. Pigou identifies economic well-being with the “national dividend”. National dividend (or in modern terminology - national income), according to Pigou, is “everything that people buy with their monetary income, as well as the services provided to a person by the home he owns and lives in.” Many material goods and services purchased for money. AND Pigou considers this indicator not only a measure of production efficiency, but also a measure of social welfare.

When calculating the national dividend, as Pigou argued, several points must be taken into account. Firstly, the national dividend does not include services provided to oneself and in the household (for example, a person’s marriage to his housekeeper reduces the size of the national dividend), and secondly, the national dividend only takes into account goods and services that are part of final consumption (to avoid double counting).

It is possible to compare the size of the national dividend for different periods only excluding the influence of rising prices. To achieve this, Pigou introduced the concept of the real national dividend. The general level of well-being is influenced not only by the size of the national dividend, but also by the principles of its distribution. Based on the law of diminishing marginal utility, Pigou put forward the thesis that transferring a portion of income from the rich to the poor increases the amount of total welfare. Pigou's logic is as follows: since income is subject to diminishing marginal utility, a transfer of income from rich to poor will increase aggregate welfare, since the amount of satisfaction of the latter increases more than the amount of satisfaction of the former decreases.

On the basis of these assumptions, A. Pigou developed his theory of taxation and subsidies, where the main principle of taxation is the principle of the least total sacrifice, i.e., equality of marginal sacrifices for all members of society, which corresponds to a system of progressive taxation.

In the context of distribution problems, A. Pigou also considers the question of the relationship between the economic interests of society and the individual. The key concept of Pigou's concept is the divergence (gap) between private benefits and costs that appear as a result of the economic decisions of individuals, on the one hand, and public benefits and costs that fall to everyone, on the other.

As we have already found out, for A. Pigou, the size of the gross national product does not accurately reflect the level of general well-being, since the state of the environment, the nature of work, forms of leisure, etc. are real factors of well-being, and therefore it is possible to change the level of general well-being while keeping the same level of economic well-being. In this regard, Pigou analyzes in particular detail situations when the activities of an enterprise and a consumer have the so-called externalities , which do not have a monetary measure, but nevertheless, have a real impact on well-being (a textbook example of negative external effects: environmental pollution as a result of industrial activities of enterprises). Pigou notes that depending on the sign of externalities, public costs and benefits can be either greater or less than private ones.

The key concept of Pigou’s concept is precisely the divergence (gap) between private benefits and costs that appear as a result of the economic decisions of individuals, on the one hand, and public benefits and costs that fall to everyone, on the other. The object of Pigou's closest attention were situations when the social costs of producing a product were greater than the private costs of its producer. As a result, private supply, subject to profit motives, turned out to be more than optimal from the point of view of the entire society, the distribution of resources across various sectors of production.

To illustrate this, let’s use an example from an economic theory course.

Under external effect the impact of the transaction on third parties is implied (third parties are economic entities not participating in this exchange transaction), it is not taken into account in the contract and manifests itself in the form of costs or benefits not reflected in the market price. Externalities, or external effects, are divided into positive(bring additional benefits to third parties, such as education) and negative(bring additional costs and harm to a third party, for example, smoking). Production that harms the environment and other producers generates negative externalities. Services in the field of health care, education, irrigation, landscaping, etc. generate positive externalities. For example, if you grow beautiful flowers on your balcony, you create a positive external effect for everyone who admires them completely free of charge.

For elimination negative effects the government will introduce a deterrent tax in the amount of marginal external costs (or force the manufacturer to buy a license or install purification equipment). Introducing a tax will shift the curve S to position S 1 . And at the price Pe (as a result of rising costs), there will be fewer people wanting to produce this product Q’, and the number of people wanting to buy this product will remain the same Q e .

P 1 E 1 tax S

0 Q' Q 1 Q e Q

As a result, there will be a shortage of goods on the market, which will lead to an increase in prices to P 1 and the equilibrium will shift to point E 1, the volume of output will decrease to the level Q 1. The area of ​​the triangle AEE 1 is the loss of efficiency as a result of the introduction of the tax. Thus, in the presence of a negative external effect, an economic good is sold and purchased in a larger volume compared to the efficient (Q’) volume. Consequently, there is an overproduction of goods and services with negative externalities.

According to Pigou, For each good produced, the condition must be met that the marginal social benefit, which reflects the amount that all people would be willing to pay for all the benefits of using an additional unit of the good, is equal to the marginal social cost, that is, the amount that people would be willing to pay for the alternative use of the resource .

In cases where marginal social benefit exceeds marginal private benefit, the government must subsidize the production of that good. When marginal social cost exceeds marginal private cost, the government should tax economic activities that incur additional social costs (such as smoke emissions from industrial activity) so that private costs and the price of the good then reflect those costs.

Thus, maximizing social welfare, according to Pigou, involves not only a system of progressive income taxation, but also the measurement of so-called external effects and the organization of the redistribution of funds through the mechanism of the state budget.

Interesting in Pigou’s theory of well-being is the conclusion that he draws from the recognition of the theory of interest (developed by the representative of the Austrian school Boehm-Bawerk, who considers interest as a reward for waiting in conditions of preference for current goods to future ones). Recognizing that our gift of foresight is imperfect and we evaluate future benefits on a decreasing scale (except during periods of revolutionary enthusiasm) Pigou concludes that it is difficult to implement large-scale investment projects with a long payback period(including investments in education) and wasteful use of natural resources. This proves that the “free market” system creates conflicts not only between private and public interests, but also conflicts within the public interest: between the benefit of the present moment and the interests of future generations. This leads to a completely logical conclusion that the state must not only ensure the maximization of social welfare through the mechanism of income redistribution and taking into account “external effects,” but also ensure the development of fundamental science, education, and implement environmental projects, protecting the “interests of the future.” But the strongest arguments in favor of strengthening the economic role of the state were put forward by J. Keynes.

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introduction

Throughout his life, a person strives for balance, the correct distribution of income, products and everything that a person has. Therefore, it was necessary to create some rules, and gradually the economic theory of welfare arose. So, welfare is the provision of the state, class, social group, family with material, spiritual and social benefits. The well-being of a social group, family, etc. directly depends on the well-being of the state in which they are located. welfare economic pigou pareto

Modern welfare economics arose from two sources. The first of these is the normative analysis of personal well-being, or the utility that an individual derives from the environment. This source goes back to the concept of utilitarianism founded by Jeremy Bentham. The second source is the mathematical theory of elections and collective decisions, dating back to the work of French mathematicians Jean-Charles Borda and Marie-Jean-Antoine-Condorcet. The mathematician Charles Johnson also made his contribution in this direction.

The economic theory of welfare is closely related to the theory of general equilibrium, as it studies the best distribution of goods between people and production resources between industries. The optimal distribution of any resource or consumer good cannot be determined based only on partial equilibrium in the market for this resource or good. It depends on the situation on the markets, on their interconnection and interdependence.

This theory depends ultimately on individual value judgments, the truth or falsity of which cannot be established with certainty, although, based on logic and empirical knowledge, appropriate ethical criteria can be developed so that an "acceptable level" of general agreement on what you should see what you want, it is not at all unattainable in principle.

The first chapter of this work examines the main theoretical provisions of the economic theory of welfare.

The second chapter examines the views of V. Pareto on the economic theory of welfare.

The purpose of this test is to review the basic principles of the economic theory of welfare. To achieve the goal, it is necessary to solve two problems: to study the theoretical foundations of the economic theory of welfare and to monitor the process of resource distribution in a market economy.

Chapter 1. Basic theoretical principles and general characteristics of the economic theory of welfare

1.1 Evolution of views on welfare issues

Humanity, like the individual, has always strived to achieve well-being. Already in the ideas of early utopian socialism, the abolition of private property, egalitarian distribution and complete regulation of public life seemed to be the only condition for achieving universal happiness. Representatives of this doctrine believed that a person is unhappy because he is envious of his more successful neighbor. And there is only one way to destroy envy - to make everyone the same.

This idea was expressed especially clearly by T. Campanella, an Italian Dominican monk and a Frenchman, Morelli. But it must be borne in mind that achieving the sameness of people, which presupposes their complete absence of any property, destroys not only envy, but also the mechanism of social comparison, which is the basis for the dynamic development of both the economy and other aspects of social life. It is no coincidence that the ideal model of society for representatives of early utopian socialism is a stationary model, working according to the scheme of simple reproduction.

The ideologists of capitalist production, with their philosophy of selfishness and individualism (A. Smith), in the theory of welfare, focused on production, viewing welfare as a synonym for wealth, where wealth was considered as products of material production. Within the framework of these ideas, the basis and source of well-being is the accumulation of national capital, and the indicator of the level of well-being is the growth in the amount of goods per capita or the net income of the nation, which in turn depends on the resources of capital, land and labor. It follows that the factors of economic growth, the most important of which was the accumulation of capital and the division of labor, automatically became factors in the growth of well-being. The classics unanimously considered the system of “natural freedom” to be a prerequisite for the growth of national wealth.

The origins of modern theories of welfare should be sought in utilitarianism - an ethical theory that recognizes the usefulness of an action as a criterion of its morality. The founder of this theory was the English philosopher I. Bentham (1748--1832), who believed that philosophy has no more worthy occupation than supporting the economy in everyday life. Bentham called well-being the goal of any human action. Consequently, according to Bentham, the only universal social science should be “eudaimonics” - the science of achieving well-being. Bentham proposed measuring well-being by subtracting the amount of suffering from the amount of pleasure over a certain period of time. In his theory, he proceeds from the fact that every person can perform those arithmetic operations that are necessary to obtain maximum happiness. It should be noted that in Bentham's concept a person is only a consumer; the sphere of production interests him very little. Moreover, it is aimed at immediate consumption - future pleasures, according to the “arithmetic of happiness,” are considered with less weight than present ones. This person (Bentham's universal consumer) is well recognized; it is he who becomes the main figure of marginalist analysis. And the same G. Gossen, who was the first to formulate the law of diminishing marginal utility from traditional economic science, took precisely the philosophy of utilitarianism with its principles of reasonable egoism, subjective comparison of benefits and sacrifices, pleasure and suffering. He even proposed renaming political economy Genusslehre, that is, the doctrine of satisfaction (or pleasure), where maximizing pleasure (utility) becomes the most important principle of social management.

In Bentham, as in the marginalists, we see the reduction of all motives of human behavior to the achievement of pleasure; They view wealth as a special case of pleasure. This is the first difference between the views of Bentham and Smith. The second difference is that Bentham did not trust the coordination of individual aspirations for well-being to the market and competition, considering this the prerogative of legislation, where the ideal set of laws should be built on the principle of “maximum happiness for all.” It is worth noting that Bentham’s views had a great influence not only on representatives of the marginalist trend in economic science, but also on Sismondi, who believed that the science of management should set as its goal the happiness of people united in society. In his words, “...it seeks means to secure for men the highest welfare compatible with their nature.”

The next paragraph will examine the contribution of Arthur Pigou to the creation of the economic theory of welfare, since Pigou's work laid the foundation for the theory of distribution of national income and put forward the problem of combining the economic interests of individuals, firms and society.

1.2 Arthur Pigou's contribution to welfare economics

A significant contribution to the development of neoclassical ideas was made by the student and follower of Alfred Marshall, a representative of the Cambridge school of neoclassics, Arthur Pigou (1877-1959). The scientist's main ideas were reflected in the work "Economic Theory of Welfare" (1932), which began a new direction of economic research and the first attempts to theoretically substantiate the economic functions of the state. When discussing the problems of economic research, the scientist emphasized the realism of economic science, the scope of which should be determined by practical tasks. According to A. Pigou, the germ of economic science should not be a passion for knowledge, but public enthusiasm that appears against the squalor of dirty streets and the bleakness of mutilated lives. Consequently, the scientist saw the goal of his own research as finding convenient practical tools for ensuring well-being, in other words, developing measures that, based on the proposals of economists, a statesman can take. Taking this into account, A. Pigou substantiated the concepts of economic well-being and its most important factors. Arguing that the category of social welfare reflects elements of our awareness and can be described in a “more-less” framework. The scientist deliberately limited his own research to the sphere of social welfare in which the scale of measurement using pennies can be directly or indirectly applied. The scientist called this area of ​​public welfare economic welfare.

Arguing that there is no clear limit between economic and non-economic well-being, A. Pigou drew attention to the fact that economic well-being does not serve as a barometer or indicator of well-being in general, since well-being often changes, while economic well-being remains at the previous level; and yet changes in economic well-being rarely correspond to the same changes in well-being as a whole. Consequently, the scientist noted that the concept of individual well-being is not limited to its economic aspect and includes such indicators of quality of life as environmental conditions, working and leisure conditions, access to education, public order, medical care, and the like.

A. Pigou considered the most important indicator of economic well-being, its “double”, the national dividend, that part of the material income of society (including, of course, income that comes from abroad), which can be expressed in pennies. Thus, the scientist determined economic well-being through national income - the value that remains after deducting the costs of reimbursing spent capital goods from the annual flow of goods and services for final consumption.

The scientist determined the economic well-being of society:

The size of the national dividend;

The method of distributing it among members of society.

Determining the criteria for maximizing the economic well-being of society in terms of optimal allocation of resources, A. Pigou used the concept of the marginal net product. He argued that equalizing the marginal net products resulting from multiple uses of resources enables the maximization of the national dividend. The scientist considered free competition, capable of ensuring the realization of private interests and the unlimited movement of goods, to be a necessary prerequisite for achieving this state.

Having analyzed the problems of strictly accounting for the volume and dynamics of the national dividend, A. Pigou was one of the first to draw attention to the imperfection of the national income indicator as a measure of economic well-being, noting that the monetary measurement of the material income of society can be attributed to the most incredible paradoxes. Let's look at some examples:

“If a person rents a house that belongs to a certain person and the furniture in this house, then the services received by this person are included in the national dividend, but if this person received the house with the furniture as a gift, then such services are not included in the national dividend.

If a farmer who has sold the products of his farm buys the food his family needs at the market, then a significant part of the goods he purchased will be included in the national dividend; however, these products will no longer be included in the national dividend if the farmer, instead of buying goods on the market, keeps part of the produced meat and vegetables.

The philanthropic activities of unpaid organizations, church ministers, Sunday school teachers, and the scientific work of selfless experimenters are not yet included in the national dividend.

The national dividend includes nominal wages, much less than their real value.

Systematic harm to nature does not affect the value of the national dividend.

Women's labor, whether employed in the factory or at home, is counted in the dividend when it is paid for, but is not counted when wives and mothers work unselfishly in their own families. If a man marries his housekeeper or cook, the national dividend is reduced."

Carried out a study of the problem of coordinating the economic interests of individuals, firms and society as a whole in the context of distribution relations. When discussing the problems of economic well-being, A. Pigou distinguished between the well-being of individuals, social groups and society as a whole. In this regard, the scientist highlighted:

Social net product as “the aggregate increase in the national dividend;

Private net product, as “an increase in goods that can be sold, as well as an increase in the income of the individual who provides capital investment.

The starting point in his theoretical construction was the idea that free competition does not ensure balancing of private and public net products and automatic coordination of the interests of society and individuals.

Thus, unlike his predecessors, A. Pigou analyzed not the static market equilibrium, but the deviation from it. In his work, A. Pigou often refers to the treatise “The Principle of Political Economy” published in 1883 by the English researcher Henry Sidgwick (1838-1900), who was at the origins of the economic theory of welfare.

G. Sidgwick was one of the first to draw attention to the differences between the same concepts depending on the micro- or macroeconomic levels of analysis. In contrast to the “classics,” he argued that the system of “natural freedom” creates a conflict between private and public interests and does not provide an effective solution to many socio-economic problems, especially in the field of distribution. Having outlined the need to limit the “laissez faire” system (the principle of non-intervention) on the basis of state intervention in economic life, G. Sidgwick believed that a more equal distribution of public goods increases the overall level of well-being of the nation.

With the emergence of monopolies that violate the foundations of market competition, preventing the free movement of resources. Analyzing this problem, A. Pigou first introduced the terms “imperfect” and “monopolistic competition”, which played an important role in the studies of the next generations of neoclassics.

Arguing that private entrepreneurial activity, which provides an appropriate net product, can bring both benefits and losses to society, the scientist laid the foundation for the modern theory of externalities. He identified positive externalities, due to which the marginal private net product is less than the corresponding social product due to the fact that by-product services are received by some third party, which is technically difficult to pay for these services. According to the researcher, examples of positive externalities can be cases when:

“The services of a conveniently located lighthouse are mainly used by ships, which cannot be forced to somehow pay for these services.

Investing in the construction of roads or private routes, which increases the prices of land located nearby.

Investing in forest plantations, installing lights at the doors of private houses, investing resources that are directed to cleaning emissions from factory chimneys.”

Negative externalities that cause “marginal private net product to exceed social net product.” According to the scientist, we can talk about collateral uncompensated losses for third parties under conditions where, for example, one person is busy breeding rabbits that devastate vegetation in lands that belong to another person.

Arguing that under conditions of free competition there are circumstances that prevent the automatic achievement of the optimum, A. Pigou drew attention to the fact that in cases where private enterprises are left to themselves, the distribution of resources (even under conditions of free competition) becomes the least favorable ( of all possible) in a way from the point of view of influencing the national dividend. Consequently, the scientist concluded that it was necessary to supplement the policy of "laissez faire" with state regulation of economic life, noting that even Adam Smith did not fully realize how much the "System of Natural Liberty" needed protection through special laws so that it could ensure the most productive use resources."

Depending on the maximization of the national dividend on the action of two complementary forces (private and public interests), A. Pigou identified two forms of government intervention in economic life:

1. direct, justified under conditions of monopolization of the economy and associated with state control over prices and production volume;

2. indirect (mediated), justified under conditions of free competition and associated with the taxation mechanism.

“For any industry in which there is reason to believe that as a result of the free implementation of industrial interest, resources will not be invested in the amount that is necessary from the point of view of increasing the national dividend,” the scientist noted, “there are grounds for government intervention.”

Consequently, under the conditions of a market economy, the task of the state, according to the English researcher, is to internalize external effects, to transform the difference between private and public interests from implicit to explicit. “The government is able to reduce the gap between relevant products in one area or another by providing investment in this area,” wrote A. Pigou. He considered the most important forms of providing such support and imposing restrictions to be substitutes, respectively, taxes.

A. Pigou's idea that the presence of external effects makes government intervention in the economy legitimate was questioned only in the 60s. XX century, when the Nobel Prize winner in 1991, the American economist R. Coase proved that the presence of external effects is associated with the institutional environment and blurred property rights. The specification of the latter, according to G. Coase, makes it possible to internalize external effects and excludes government intervention in the economy under conditions of free competition.

Defending the principles of “the greatest good for the greatest number of people,” A. Pigou adhered to the idea that the most important factor that influences the well-being of society is the distribution of national income. The outcome of this theoretical position was the assertion that maximization of social welfare could be achieved through a more equal distribution of income, even if this negatively affected the accumulation of capital and private initiative.

Based on the law of descending marginal utility and A. Marshall's idea regarding the different value of the same amount of money for rich and poor people, the scientist argued that the losses caused to the economic well-being of the wealthy if their right to manage resources is transferred to the poor will be significantly less in compared with gains in economic well-being for the poor. From this, the scientist concluded that as long as the size of the dividend as a whole does not decrease, any significant increase in the real incomes of the poor due to a corresponding decrease in the real incomes of the relatively rich will lead to an increase in economic well-being.

Consequently, the scientist defended a system of progressive taxation according to the principle of “least aggregate sacrifice.” He pointed out the need for the tax rate to depend on the amount of income of a person, the use of preferential prices for goods, the introduction of an inheritance tax, the encouragement of voluntary donations, and the like.

It is important to note that the works of A. Pigou contributed to a gradual departure from the orthodox version of the quantity theory of money. The scientist made adjustments to the research methodology of the American economist I. Fisher (1867--1947), the author of the famous monetary exchange equation. He proposed to take into account the influence on the motives of behavior of business entities, the desire to save part of the money as a reserve in the form of bank contributions or securities.

In modern neoclassical theory, the so-called “Pigou effect” or “real cash balance effect” is widely used, according to which an increase (decrease) in the price level should have the ability to reduce (increase) the real value (or purchasing power) of financial assets, especially those with a fixed monetary value ( fixed-term accounts, bonds), making it possible to reduce (increase) total spending in the economy.

Thus, different people with different ideologies view welfare economics in different ways. Every person is looking for a criterion of well-being for himself.

In general, Pigou’s economic theory, oriented toward new conditions for the development of society, addressed problems that were almost simultaneously studied by representatives of the Keynesian school, which also emerged from the Cambridge school.

CHAPTER 2. V. PARETO'S VIEW ON THE ECONOMIC THEORY OF WELFARE

2.1 Pareto optimum: search for an efficiency criterion

According to his economic views, V. Pareto (1848-1923) can be classified as a representative of the Lausanne School of Economics. Like Walras, Pareto considered political economy to be a kind of mechanics that reveals the processes of economic interactions based on the theory of equilibrium. In his opinion, this science should explore the Mechanism that establishes a balance between the needs of people and the limited means of satisfying them. V. Pareto made a significant contribution to the development of the theory of consumer behavior, introducing ordinal ones instead of the quantitative concept of subjective utility, which meant a transition from the cardinalist to the ordinalist version of the theory of marginal utility. Further, instead of comparing the ordinal utility of individual goods, Pareto proposed a comparison of their sets, where equally preferable sets were described by indifference curves.

According to Pareto, there is always a combination of values ​​in which the consumer does not care in what proportion he receives them, as long as the sum of these values ​​does not change and brings maximum satisfaction. These provisions of V. Pareto formed the basis of the modern theory of consumer behavior.

But Pareto is best known for his principle of optimality, which was called the “Pareto optimum,” which formed the basis of the so-called new welfare economics. The Pareto optimum states that the welfare of society reaches its maximum, and the distribution of resources becomes optimal, if any change in this distribution worsens the welfare of at least one subject of the economic system. In a Pareto optimal situation, it is impossible to improve the position of any participant in the economic process without simultaneously reducing the welfare of at least one of the others. This market state is called a Pareto-optimal state. According to the Pareto criterion (criterion for the growth of social welfare), movement towards the optimum is possible only with such a distribution of resources that increases the well-being of at least one person without harming anyone else.

The starting premise of the Pareto theorem was the views of Bentham and other early representatives of utilitarianism among economists that the happiness (considered as pleasure or utility) of different people is comparable and additive, that is, they can be summed up into a certain common happiness of all. And, according to Pareto, the criterion of optimality is not the general maximization of utility, but its maximization for each individual within the limits of possessing a certain initial supply of goods.

Based on the premise of rational behavior of the individual, we assume that the company, when producing products, uses such a set of production possibilities that will provide it with the maximum discrepancy between gross revenue and costs. The consumer, in turn, purchases a set of goods that will maximize his utility. The equilibrium state of the system presupposes the optimization of objective functions (for the consumer - utility maximization, for the entrepreneur - profit maximization). This is the Pareto-optimal state of the market. It means that when all market participants, each striving for their own benefit, achieve mutual equilibrium of interests and benefits, total satisfaction (the overall utility function) reaches its maximum. And this is almost what A. Smith talked about in his famous passage about the “invisible hand” (though not in terms of utility, but in terms of wealth). Subsequently, the theorem was indeed proven that the general market equilibrium is the Pareto-optimal state of the market.

So, the essence of Pareto's views can be reduced to two statements:

Any competitive equilibrium is optimal (direct theorem),

The optimum can be achieved by competitive equilibrium, which means that the optimum selected based on certain criteria is best achieved through the market mechanism (the inverse theorem).

In other words, the state of optimal objective functions ensures balance in all markets. Optimization of objective functions, according to Pareto, means choosing the best alternative from all possible by all participants in the economic process. However, it should be noted that the choice of each individual depends on prices and the initial volume of goods that he has, and by varying the initial distribution of goods we change both the equilibrium distribution and prices. It follows that market equilibrium is the best position within the framework of an already formed distribution system, and the Pareto model assumes that society is immune to inequality. This approach will become more understandable if we take into account the “Pareto law”, or the law of income distribution. Based on a study of the statistics of a number of countries in different historical eras, Pareto established that the distribution of income above a certain value retains significant stability, and this, in his opinion, indicates the uneven distribution of natural human abilities, and not the imperfection of social conditions. This resulted in Pareto’s extremely skeptical attitude towards issues of social reconstruction of society.

However, it is difficult to dispute the position that the optimal, according to Pareto, is very often socially unacceptable. Therefore, even in line with the neoclassical direction of political economy, other theories of welfare are being formed.

2.2 Pareto welfare function

Let's consider a geometric example of solving the distribution problem for the case of two individuals. Suppose an indicator of an individual's well-being is the utility he receives, which in turn depends only on the individual's income. On the x-axis we will plot the income received by individual A (IA), and on the y-axis we will plot the income of individual A (IB). A line drawn at an angle of 45° will show us the equal distribution of income between individuals, so let's call it the ray of equality. The line shows how the same social “pie” can be divided between two individuals (i.e., it is the limit of possible income). The original distribution corresponds to point K, the equal distribution of income is indicated by point L.

Suppose now that the utility received by an individual depends not only on his income, but also on how income is distributed in the community. Individual B is concerned about inequality in society, and for this reason, in the process of redistribution, as his income increases, his own utility increases, while the utility of individual A decreases, only up to a certain point (point M). As inequality further increases, its utility decreases. Similarly, the utility of individual A decreases as the utility received by individual B decreases below the level corresponding to point N. We have thus assumed the existence of externalities in consumption, and their magnitude is directly dependent on the degree of inequality in society.

Let us assume that the action of the market mechanism led to the distribution of utilities corresponding to point K, so that one of the members of society (B) turned out to be rich, and the other (A) - poor. Going to any point on the KL section will be an improvement according to the Pareto criterion. In the case of two individuals, one can expect that the rich person will voluntarily “share” with the poor person (i.e., a voluntary transfer will take place).

However, this may not happen if there are many individuals in a society. Charitable redistribution of income is like a public good, and if the number of participants in the redistribution process increases, then citizens' expectations that someone else will fulfill their debt also increase. The role of the state is that by replacing voluntary transfers with forced redistribution of income through the tax system, it solves this problem, and these actions lead to Pareto improvement.

Many Pareto-efficient points in Fig. 2 belongs to section MN, any transition between points in this section is not comparable according to the Pareto criterion. But if not the social welfare vector is used, but the Pareto welfare function, a single optimal point can be found on the section MN.

Having determined the social welfare function, we can construct lines on which this function takes fixed values ​​- indifference curves for society as a whole. The social indifference curve (CIC - community indifference curve) unites the points at which the welfare of society will be the same. CICs for the Pareto welfare function have a negative slope: an increase in the utility of one of the individuals will not lead to a change in social welfare only if the utility of the other individual decreases slightly. The CICs for a symmetric utility function are symmetric about the line of equal utilities (central angle bisector). The higher the CIC lies, the higher the level of social welfare it reflects.

The concept of optimum when using the social welfare function and its difference from the concept of Pareto efficiency. Let us pay attention to the appearance of the boundary of possible utilities. The specific shape of this boundary depends on the utility functions of individuals. We assumed above that individuals' utility depends only on the income they receive, but the relationship between income and utility may differ between individuals. The same income may bring unequal utilities to different individuals; accordingly, the boundary of possible utilities may not be symmetrical relative to the line of equal utilities.

Pareto efficient are all points on the arc MN of the consumer possibilities curve; none of them is Pareto-preferred to any other - they are all Pareto-incomparable. However, the social welfare function reaches a maximum only in one of them - at the point of tangency C with the curve of possible utilities and the social indifference curve CIC1.

The specific location of the optimum point depends on the properties of the welfare function. For any Pareto function, the optimum point will be Pareto-efficient, i.e. it will be located on the arc MN. There are also specific welfare functions: the Bergson-Samuelson welfare function, the maximax welfare function, etc. All of them are symmetrical, but built on the basis of different value systems; Accordingly, the states that each of them considers as optimal will also be different.

CONCLUSION

Welfare is an extremely important element in the life of not only one individual, but also of any state. Welfare economics is an ideal that people strive to achieve. Despite the fact that this ideal is not achievable, it is good because when striving for it, a person makes the state of his life better, revises his ideas for the better, from an economic point of view, in a direction.

Some may say that welfare economics is elusive and ask questions like “why pursue frivolous questions?” I can answer this way: the minds of many economic figures and scientists are occupied with questions of the economic theory of well-being. Well-being affects absolutely all spheres of human activity, not only economic. Since ancient times, scientists have dealt with these issues only in passing. A. Pigou and V. Pareto thoroughly tackled the issue of welfare at a serious level. It was they who proved that the development of welfare theory can, like a chain reaction, improve all areas of the economy. That is, if you start to develop one area, then the next one along the chain will begin to improve, and so on.

Arthur Pigou believed that economic well-being cannot be an indicator of human well-being, since a person’s well-being is influenced not only by himself, for example, his financial security, but also by the state of the environment, relationships with other people, etc., that is, on well-being people are also influenced by non-economic factors.

The Pareto optimum is that the optimal state of the market is achievable only if any change in the distribution of resources worsens the welfare of at least one subject.

The difference between Pigou's economic theory of welfare and the Pareto optimum is that Pigou considered the free functioning of market competition to be an insufficient condition for optimizing overall welfare.

It can be concluded that further development of the economic theory of welfare is necessary. It is necessary to take it into account when solving important economic issues.

LIST OF REFERENCES USED

1. Galperin V. M., Ignatiev S. M., Morgunov V. I. Microeconomics in 2 volumes. - St. Petersburg. : Economic School 2006.

2. Economic school. Issue 5. Akimov D. V. Theory of public welfare and economics of the public sector. //(National Research University - Higher School of Economics)-2004.

3. Chepurin M. N. Course of economic theory. - Kirov: Publishing house ASA-2006.

4. A. Pigou Economic theory of welfare. - M.: Progress-1985.

5. Galperin V. M. Welfare economics and public choice - milestones in economic thought. - St. Petersburg. : Economic School 2008.

6. M. Rothbard On the reconstruction of the economic theory of utility and well-being. - M.: Sotsium-1956.

7. Course of economic theory / ed. Sidorovich A.V. - M.:

8. History of economic doctrines / Ed. V. Avtomonova, O. Ananina, N. Makasheva: Textbook. Benefit. - M.: INFRA-M- 2001.

9. G. P. Zhuravleva. Economics: textbook for universities - M: Economist, 2006.

10. Bartenev, S.A. History of Economic Thought. - M.: Lawyer,

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Welfare economics theory

Definition 1

Welfare economics is understood as a section of economic theory that uses macroeconomic approaches and methods to analyze and evaluate the economic well-being, prosperity and well-being of society (to a greater extent this concerns the establishment of a general equilibrium state in the economic system between the efficiency of the economy and the final distribution of all kinds of goods).

An important task of welfare economics is to develop ethical parameters on the basis of which one can draw conclusions about what is desirable and what should be.

Welfare theory studies methods of organizing economic activity that make it possible to provide society with maximum wealth, i.e. economic well-being. An integral part of welfare economics are value judgments, the plausibility of which cannot be verified using empirical methods, therefore such economics is classified as a normative sphere of economic science.

Note 1

The main problem of the economy under consideration is the determination of social welfare. Questions arise about the criteria by which the welfare of society can be concluded, and the decision makers who influence public welfare.

In economic science there are:

• Bentham's welfare criterion;
• V. Pareto criterion.

According to the first criterion, the welfare of society is characterized by the happiness of a certain number of the population. When using this criterion, subjective and objective problems arise. The first group of problems is characterized by different assessments of the same life phenomena by different people: for some they are good, and for others they are bad. The objective problem lies in the different positions of individual members of society under the same conditions of the economic environment.

According to V. Pareto’s criterion of well-being, measurement and interpersonal comparison of the utility of goods is not required, but its weak point is the limited scope of possible use. Real life conditions are characterized by the creation of benefits for some when making changes, and damage for others.

Gradually, the economic theory of welfare transformed into a theory of social choice, which provides a positive analysis of the nature of education and the implementation of various social preferences.

Market conditions for the development of wealth

The needs of an individual, a social group and the entire society as a whole are so diverse that it is not possible for any government structure to take them into account fully and in the proper quality. Moreover, in this area there is a law of ascension of needs. Its action is manifested in the constant movement of higher-order needs to ordinary ones, and ordinary ones to lower-order needs. The result is the extinction of some needs and the emergence of new ones. That is why the market system makes it possible to create a flexible and effective mechanism for quickly adjusting the correspondence of goods and conditions from outside to the needs of society, and, consequently, the optimal formation of well-being for the individual is ensured.

With the assistance of the market, timely coordination of production structures and systems of solvent needs occurs. This is due to the promotion of the market as a neutral mechanism to social values, alignment of interests of different economic entities and the ability to lead to an increase in the well-being of the entire society. The public interest is ensured when each participant performs actions that meet only his interests. For example, if there is a product or service that is highly valued by consumers, but is not currently being produced, there will be people willing to pay for such a product or service. Entrepreneurs always take advantage of such opportunities. When the value of an individual product for the consumer exceeds the cost of its production, potential business profit occurs and the enterprise will produce these goods.

Thus, the market system highlights the real needs of society, while becoming a center of wealth and a platform for increasing consumption. The social significance of the market is complemented by the fact that in such conditions the only manager of the situation is a person as a consumer of goods.

State regulation of the welfare economy finds its manifestation in two points:

1. Creating an environment to support and develop the market mechanism for creating wealth;
2. Adjustment and modification of this mechanism according to changes in the conditions of economic development, norms of society and its values.

Types of public goods

All economic benefits are divided into:

• Private;
• Public;
• Mixed.

When defining these types of benefits, auxiliary concepts are introduced.

An excludable good is something that can be removed from the consumption of the entire population except one individual who has paid a certain price for it.

Competitive goods include products or services that cannot be consumed simultaneously by several buyers. This category includes those goods and services that are consumed by one consumer and are eliminated in the consumption process, i.e. no longer exist. If it is possible, after consumption of a good by one business entity, its use by another, provided there are no additional costs, a non-competitive good occurs.

Private goods are understood as competitive excludable goods, and public goods are non-competitive and non-excludable. Intermediate goods and services are mixed. A mixed good is characterized by either simultaneously competitive and non-excludable goods, or excludable and non-competitive goods.

Figure 1 shows a table with criteria for the allocation of public goods.

Figure 1. Competitiveness and exclusivity criteria. Author24 - online exchange of student work