Beyond the Ordinal Welfare Economics

The derivation of a social welfare function is one of economists' key research topics and remains a complex open question. A country's social welfare function involves social ordering over alternative possible state actions to identify socially desirable actions that result in increased social welfare. Understanding of relevant and reliant social welfare functions is essential for efficient resource allocation for economic growth and development. For this purpose, it is important to investigate country's actual social welfare level to identify conditions and variables that positively influence welfare and economic growth.In contrast to the classic utilitarian approach, throughout the book a key assumption that human wealth has to be evaluated in money terms, or more correctly, in some sort of cardinal units. Relying on the assumption of ordinal utility or wealth expressed as preferences for a particular state of the world is of little value in economic policy formation.The central theme of this book is therefore to explore the evolution of suitable welfare evaluation that will enable individual or economic policy makers to validate their welfare state. The derivation of a social welfare function presented in the book enables individuals and policy makers to evaluate the effects on welfare from their actions and decisions. Individuals can direct their actions and decisions toward overcoming the official poverty threshold. If they succeed, one can claim that they have achieved an adequate level of welfare. Depending on their income to poverty ratios, i.e., their welfare position above or below the poverty threshold, persons enjoy higher or lower welfare. The same is true for policy makers. Government actions that lead to changes in the poverty rate can be viewed as welfare damaging or welfare benefiting.