Welfare Economic Approach Research Articles

A Welfare Economic Approach to Planetary Boundaries

AbstractThe crises of both the climate and the biosphere are manifestations of the imbalance between human extractive, and polluting activities and the Earth’s regenerative capacity. Planetary boundaries define limits for biophysical systems and processes that regulate the stability and life support capacity of the Earth system, and thereby also define a safe operating space for humanity on Earth. Budgets associated to planetary boundaries can be understood as global commons: common pool resources that can be utilized within finite limits. Despite the analytical interpretation of planetary boundaries as global commons, the planetary boundaries framework is missing a thorough integration into economic theory. We aim to bridge the gap between welfare economic theory and planetary boundaries as derived in the natural sciences by presenting a unified theory of cost-benefit and cost-effectiveness analysis. Our pragmatic approach aims to overcome shortcomings of the practical applications of CEA and CBA to environmental problems of a planetary scale. To do so, we develop a model framework and explore decision paradigms that give guidance to setting limits on human activities. This conceptual framework is then applied to planetary boundaries. We conclude by using the realized insights to derive a research agenda that builds on the understanding of planetary boundaries as global commons.

The Impact of the State on the Quality of an Economic System: A Cross-Country Analysis

The paper discusses the role of the state in shaping an economic system which is, in line with the welfare economics approach, capable of performing socially important functions and achieving socially desirable results. We describe this system through a set of indexes: the IHDI, the World Happiness Index, and the Satisfaction of Life index. The characteris-tics of the state are analyzed using a set of variables which describe both the quantitative (government size, various types of governmental expenditures, and regulatory burden) and qualitative (institutional setup and property rights protection) aspects of its functioning. The study examines the “old” and “new” member states of the European Union, the post-communist countries of Eastern Europe and Asia, and the economies of Latin America. The main conclusion of the research is that the institutional quality of the state seems to be the most important for creation of a socially effective economic system, while the level of state interventionism plays, at most, a secondary and often negligible role. Geographical differentiation is also discovered, as well as the lack of a direct correlation between the characteristics of an economic system and the subjective feeling of well-being. These re-sults may corroborate the neo-institutionalist hypothesis that noneconomic factors, such as historical, institutional, cultural, and even genetic factors, may play an important role in making the economic system capable to perform its tasks; this remains an area for future research.

Managing Water Scarcity at a River Basin Scale with Economic Instruments

This paper presents a conceptual framework for both assessing the role of economic instruments, and reshaping them in order to enhance their contribution to the goals of managing water scarcity. Water management problems stem from the mismatch between a multitude of individual decisions, on the one hand, and the current and projected status of water resources on the other. Economics can provide valuable incentives that drive individual decisions, and can design efficient instruments to address water governance problems in a context of conflicting interests and relevant transaction costs. Yet, instruments such as water pricing or trading are mostly based on general principles of welfare economics that are not readily applicable to assets as complex as water. A flaw in welfare economic approaches lies in the presumption that economic instruments may be good or bad on their own (e.g., finding the “right” price). This vision changes radically when we focus on the problem, instead of the instrument. In this paper, we examine how economic instruments to achieve welfare-enhancing water resource outcomes can realize their full potential in basin-scale management contexts. We follow a political economy perspective that views conflicts between public and private interest as the main instrumental challenge of water management. Our analysis allows us to better understand the critical importance of economic instruments for reconciling individual actions towards collective ambitions of water efficiency, equity and sustainability with lessons for later-adopting jurisdictions. Rather than providing panaceas, the successful design and implementation of economic instruments as key river basin management arrangements involves high transaction costs, wide institutional changes and collective action at different levels.

Second‐Best Theory: Ageing well at Sixty

AbstractWe summarize the evolution of the theory of second best since the original contribution of Richard Lipsey and Kelvin Lancaster. Early studies investigated the optimality of piecemeal first‐best policy in controlled sectors when distortions exist elsewhere. The applied welfare economics approach of Arnold Harberger and its embodiment in cost–benefit analysis incorporated second‐best analysis into the evaluation of public programs. Modern second‐best analysis emphasizes policy‐making in a distorted economy where distortions reflect either constraints on government policy instruments or features of the economic environment such as limited government information. This is illustrated using optimal commodity and income taxation and its refinements to intertemporal and uncertain settings. Second‐best analysis is a defining feature of modern normative public economics.

Las insuficiencias del relativismo radical y el potencial del relativismo moderado

In recent years in Latin America the role of rights and increased participation of the judicial branch as the satisfaction level to settle claims related to social rights it was increased. The academic papers often addressed these issues tended to overlook the place of public policy (specifically social policy) and market economy. The hypothesis that guides this article is that the complex and changing relationship between the egalitarian aspirations of social rights and the mechanisms for providing goods and services in capitalist societies-or in other words the scope and limitations of the rights and the actions of the justice- may best be understood from a closer to the social policy and welfare economics approach. This contribution allows to introduce the concepts of commodification and decommodification as central dimensions of analysis to understand the institutional and political processes that shape the provision of satisfaction of social needs and are mediated by the conflictive logic of rights.

Road charging in multilevel-systems – National decisions under consideration of the EU-level from a political-economic view

Abstract In 2013, next to federal funds and the user financing through trucks the infrastructure in Germany was supposed to be financed through an infrastructure fee for all users of the German federal highway system. However, no car owner in Germany shall be debited greater than without an infrastructure fee. Furthermore, the fee has to be formulated consistent with European rules. Considering the past discussion in Germany and Europe regarding the compatibility of the infrastructure charge with European law, however, reveals the challenges that go beyond a pure welfare economics approach. Knowledge about welfare effects is not sufficient for a country embedded in a multilevel system. Political sciences also plays a non-negligible role. The paper at hand focuses on the complexity of decision making in multilevel systems and suggests ways to handle it with respect to the underlying topic. That is, although decisions regarding infrastructure financing maybe efficient on the national level, they may not be in a multilevel system. This has far reaching consequences on the way infrastructure is financed. The paper is structured as follows: At first the toll as an instrument for infrastructure financing is evaluated from an economic point of view as well as against the background of this paper. Subsequently, the different infrastructure financing systems in the European Union are presented and a problem that arises in such a setting is highlighted. The governance approach is then used in order to analyze possible solutions for the just mentioned challenge. Eventually, a conclusion is drawn.

Defining the public domain in economic terms: Approaches and consequences for policy

Stimulating innovation and growth in the so-called ‘creative economy’ is a current policy objective for national regulators. One policy lever traditionally applied to the creative sector is intellectual property, in particular the scope and term of protection offered by copyright. Opposition to expansion and further enclosure of the copyright public domain was previously articulated in terms of access to a commons of information. Since the Hargreaves Review of Intellectual Property in 2011, copyright reform in the UK context is increasingly framed in the language of economics. This paper reviews two prevailing economic theories shaping how policy makers discuss the public domain in debates about IP reform: a welfare economics approach which weighs increases in producer and consumer surplus under different policy configurations and an economics of innovation approach which considers the value of the public domain as a reservoir of ideas for individuals and firms. I argue that economic definitions should be augmented by a consideration of the democratic requirement of access to information. The consequences of this re-figuration of the public domain for the public interest and access to information are discussed.

Marine protected areas in a welfare-based perspective

Assuming a broad set of fisheries management goals, this paper analyzes the implementation of a marine protected area (MPA) together with open access outside, applying a bioeconomic model that ensures unchanged growth post-MPA. Taking into account that conservation and restoration, food security, employment and social surplus are amongst the objectives that many managers include in fisheries management, it is found that this broader welfare economic approach to MPAs may well recommend them to a greater degree than espoused in the more common resource rent focused studies carried out to date. It is shown that for overfished stocks, an MPA may yield resource protection, maximize harvests and increase consumer and producer surplus, as well as give higher employment. This, however, is less apparent for moderately overfished as well as highly migratory stocks. Resource protection and enhancement implicitly improves ecosystem services.

Transport Infrastructure - Adding Value

The paper is based on a lecture in the Beesley Series delivered at the Institute of Directors in London, in October 2012. Initially, it points out that transport infrastructure in the UK prior to the 20th century was planned and developed largely by private interests. Today private sector initiatives are restricted largely to air and seaports, the conduits for the nation’s trade in goods and services. The state is also inclined to intervene in this 'ports sector, which creates tensions between planned solutions and the market driven imperatives of commercial interests. State planning, notionally, is anchored by a welfare economics approach to evaluation but aspects of this are controversial and the paper argues that the current approach fails to adequately capture the competitive effects of investment. It then argues that whilst the private sector has been good at adding value by product differentiation, as illustrated by the airline industry, public sector assets by contrast are much more homogeneous in attributes, output and price. But there are opportunities for introducing variety and choice into the provision of publically provided transport infrastructure by market segmentation. The approach is illustrated by novel approaches in relation to capacity constrained commuter railways and motorways.

A welfare economic approach to measure outcomes in stuttering: Comparing willingness to pay and quality adjusted life years

PurposeThe purpose of this study was to compare two welfare outcome measures, willingness to pay (WTP) and quality adjusted life years (QALYs) gained, to measure outcomes in stuttering. MethodSeventy-eight adult participants (74 nonstuttering and 4 persons with stuttering) completed one face-to-face structured interview regarding how much they would be willing to pay to alleviate severe stuttering in three interventions of varying impact. These data were compared with QALYs gained as calculated from time trade off (TTO) and standard gamble (SG) data. ResultsMean (median) WTP bids ranged from US$ 16,875 (8000), for an intervention resulting in improvement from severe stuttering to mild stuttering, to US$ 41,844 (10,000) for an intervention resulting in a cure of severe stuttering. These data were consistent with mean changes in QALYs for the same stuttering interventions ranging from 2.19 (using SG) to 18.42 (using TTO). ConclusionsThis study presents the first published WTP and QALY data for stuttering. Results were consistent with previous cost-of-illness data for stuttering. Both WTP and QALY measures were able to quantify the reduction in quality of life that occurs in stuttering, and both can be used to compare the gains that might be achieved by different interventions. It is widely believed that stuttering can cause reduced quality of life for some speakers; the introduction into this field of standardized metrics for measuring quality of life is a necessary step for transparently weighing the costs and consequences of stuttering interventions in economic analyses.Educational objectives: The reader will be able to (a) describe the underlying theoretical foundations for willingness to pay and quality adjusted life years, (b) describe the application of willingness to pay and quality adjusted life years for use in economic analyses, (c) compare and contrast the value of willingness to pay and quality adjusted life years in measuring the impact of stuttering treatment on quality of life, (d) interpret quality adjusted life years, and (e) interpret willingness to pay data.

Is the CSR Craze Good for Society? The Welfare Economic Approach to Corporate Social Responsibility

Welfare economic analysis of Corporate Social Responsibility (CSR) equates CSR with the provision of private goods bundled with provision of public goods (or, in the symmetrical case, bundled with the curtailment of public bads). Two common examples are cause-related marketing and “green goods” where private goods are sold at premiums that are then used to pay for provision of public goods and/or curtailment of public bads. This paper expands upon the model of Besley and Ghatak (2007) for the case of imperfect government to develop a complete typology for analyzing whether the provision/curtailment of public goods/bads will be best served by companies (through CSR), by imperfect governments or by non-profit organizations. Finally the paper discusses the main differences between the welfare economic approach to CSR and the general multi-disciplinary CSR literature.

Welfare and capital-theoretic foundations of corporate social responsibility and corporate sustainability

Corporate social responsibility (CSR) and corporate sustainability (CS) are variously defined in the literature. Providing formal definitions for the two concepts, we show in this article that CS and CSR are distinct but interrelated concepts that can be usefully formalized with capital-theoretic and welfare economic approaches. CSR can particularly constitute a strategy to cope with externalities and serve as insurance against reputational risks that harm profit prospects and corporate value. Moreover, we present a formal approach for integrating the societal perspective of sustainable development with the corporate perspective of CSR and CS. This approach is complementary to a company's internal CSR and CS evaluation.

Local public transport on the basis of social economic criteria

Applying the welfare economic approach it is demonstrated what the effects of certain supply changes in the local public transport will be and the potential of innovative demand management measures are examined. Straighter bus routes would reduce the average travel time from door to door. The travel time on the buses decreases and the frequency increases, which reduces waiting times at bus stops. Using smaller buses and more of them would also increase the net benefit, but increase the need for subsidisation. The peak within the peak in the morning is hard to handle by price policy alone. Introducing a small variation of the start of the school-day for high-school pupils would make investment- and operation cost savings possible, and the inconvenience costs for the pupils could be limited. It is only during peak hours in the main direction of peak travel and in the critical section of the line that optimal price becomes high relative to the present level. Zero fares in off-peak will be social profitable, but an increase in subsidy is needed. An introduction of these policy changes would give rise to a net social benefit of 30 million SEK per year in Linköping.

Multifunctionality and Sustainability of Agriculture and Rural Areas: A Welfare Economics Perspective

Despite accord about the existence of multiple benefits of agriculture to society, there is a diversity of views when it comes to actual policy implications. This can be explained by differences in agricultural and rural economic structures, different positions in agricultural trade and different stages of societal and socio-economic development. In addition, it can be attributed to differences in epistemological foundations in libertarian and utilitarian moral philosophy. Differences in the interpretation of the roles and functions of agriculture in society between OECD, WTO and FAO also reflect the fact that these organizations have different objectives and value positions. Common to all three is recognition of the fact that a sustainable development of agriculture must reflect the ethical principle of integrating multiple societal objectives and system requirements. From a welfare economics perspective, this results in a more comprehensive approach than the traditional Paretean one, which is exclusively based on individual value judgements. In the central part of the paper, we elaborate a welfare economic approach that is based on a differentiated concept of economic, natural and social capital and that integrates a set of minimum system requirements of sustainability into a ‘sustainability-based social value function’. In the concluding section, we argue that the welfare economics perspective presented in this paper allows us to integrate the concepts of multifunctionality and sustainability. The integration of the two concepts in turn implies a paradigm shift from sectoral policy and agricultural support to a more integrated approach of territorial development. In line with that we stipulate that the elimination of market failures is necessary but not sufficient, and that an adequate compensation of the non-market benefits of a multifunctional agriculture and promotion of efficient resource allocation is a prerequisite for sustainable development.

Long-term energy services security: What is it and how can it be measured and valued?

The paper reviews some recent approaches towards measuring the extent of long-term energy security and security externality valuation. It starts out to discuss the contextual connotations of notions of ‘energy security’ in medium to long-term time frames and reviews some indicators that have been proposed to quantify it. Special attention is paid to two of these approaches, which the authors helped to develop, i.e. diversity-based indices and the Supply/Demand Index. The paper takes issue with conventional welfare economic approaches that neglect: (i) the scope on the demand side for raising security and (ii) negative feedback mechanisms of socio-political impacts of international rent transfers in fossil fuels exporting countries. The concept of energy services security is proposed with a demand-side focus. This enables application of an integrated approach to gauge the resilience of a society to meet the needs of its population for energy services over longer timescales ahead from various interrelated perspectives. Propositions are made on the attribution of security externalities to the use of fossil fuels, policies, and suggestions for further improvements of measures for energy services security.

Resource Adaptation Scheme for QoS Provisioning in Pervasive Computing Environments: A Welfare Economic Approach

Management of applications in the new world of pervasive computing requires new mechanisms to be developed for admission control, QoS negotiation, allocation and scheduling. To solve such resource-allocation and QoS provisioning problems within pervasive and ubiquitous computational environments, distribution and decomposition of the computation are important. In this paper we present a QoS-based welfare economic resource management model that models the actual price-formation process of an economy. We compare our economy-based approach with a mathematical approach we previously proposed. We use the constructs of application benefit functions and resource demand functions to represent the system configuration and to solve the resource allocation problems. Finally empirical studies are conducted to evaluate the performance of our proposed pricing model and to compare it with other approaches such as priority-based scheme and greedy method.

ＣＶＭにおける代表値の選択

This paper focuses on the problem in choosing a measure of central tendency in the valuation on the public agricultural projects. In general, total benefits of projects are evaluated by multiplying numbers of households who enjoy it by values of the measure. Because the choice of measures could vary the resulting value, considering it is important work. In this paper we focus on the selection between the mean and the madian, and we take two approach to it. One is the welfare economic approach and another is the statistical approach.

The Paretian Liberal Paradox and ecological economics

Two of the most basic considerations in collective choice are the Pareto principle and some minimal protection of individual rights. In his Impossibility Theorem, Sen (1970) shows that there is a potential inconsistency between preference sovereignty (as expressed by the Pareto condition) and the protection of minimal rights (a liberal or liberty condition). The Paretian Liberal Paradox (PLP), and the extensive debate surrounding it, prompts serious reconsideration of the traditional welfare economics approach. The critique of welfarism made by the PLP is of central importance for environmental issues given pervasive externalities, missing markets, uncertainty, and potential irreversibilities. Making collective choice decisions on these issues may require using explicit “non-utility” information and restricting individual preference sovereignty. We explore the implications of the PLP for long-term environmental policy and the transdisciplinary field of ecological economics. As a simple pedagogical device relying on sparse principles, the PLP stimulates an increased awareness of the potential conflict between preferences and rights. Recognition of the PLP focuses attention on what counts as admissible information in collective choice rules. For example, consideration of the PLP illuminates differences in the informational requirements of alternative sustainability concepts.

Financing Higher Education: Public Choice and Social Welfare

This paper considers the use of fees versus the use of taxation for the finance of higher education in a framework that pays special attention to some of the interdependencies involved. In particular, the use of subsidies, in the form of a higher education grant to students, involves, via the government’s budget constraint, an increase in taxation. This increase in income taxation imposes an obvious burden on those who do not invest in higher education, but it is not a ‘free’ good from the point of view of the grant recipients who must pay higher taxes than otherwise during their working lives. This component of taxation may be called a deferred fee. If there is a substantial external effect resulting from the higher education of a minority of the population, the appropriate policy response depends on the relevant marginal benefits and costs. It is thus important to consider the distribution of those marginal costs and benefits and the decision-taking mechanism of the government. The following discussion uses both a public choice framework, involving majority voting over the level of a grant, and a welfare economics approach which involves the maximisation of a social welfare function. In view of the fact that some people are likely to be made worse off

Economic analyses of rapid population growth.

"Discussion of the macroeconomic consequences of rapid population growth is organized into three schools: pessimists, optimists, and the recent revisionists. For the revisionists, differing views are presented about the pervasiveness and relevance of market failures, such as the negative externalities of childbearing, and about the ability of families and institutions to adjust rapidly to changes brought on by rapid population growth. A welfare economics approach is used to review the merits of various public policies to reduce fertility, including public financing of family planning services and taxes and incentives associated with childbearing." The focus is on developing countries.