Individual Welfare and Social Welfare:
An individual’s welfare is a subjective thing which consists in his utilities or satisfactions. It is something that resides in his mind. But modern economists have sought to make individual welfare objective by linking it with individual choice. If a person with a given scale of preferences chooses ‘A’ rather than ‘B’ combinations of goods, it clearly indicates that the former combination yields him greater satisfaction or welfare than the latter combination. Individual welfare in different situations can, thus, be compared through the medium of individual choice. No difficulty is involved in the comparison of individual welfare in diverse situations, if we take individual choice into account.
The concept of social welfare, on the contrary, is not so easy or simple. The reason is obvious. Society cannot be regarded as an organic whole, having its own mind like the individual. Any subjective interpretation of social welfare is, therefore, out of question. Further, it is not possible to compare social welfare in different situations through the medium of social choice. Individual choice may reflect individual welfare as pointed out above, but social choice cannot reflect social welfare because there is no such thing as unanimous social choice. Social choice is derived from individual choices, but individual choices are seldom unanimous. The only alternative then left is to define social welfare as an aggregate of the utilities or satisfactions of all individuals in society.
There are, at present, three different concepts of social welfare. The first is the paternalist concept of social welfare. According to this concept, it is the views of a paternalist authority or of a dictator, not the views of individuals in society, that matter. In other words, the paternalist authority has its own ideas about welfare which it seeks to impose on individuals.
The second is the Paretian concept of social welfare. According to this concept, social welfare (or, the welfare of society) depends upon the collective welfare of all the individuals comprising society and even if one individual is better off, no one being worse off, then social welfare may be said to have increased.
The third concept of social welfare is that of Abraham Bergson, according to which changes in economic organization make some persons better off and others worse off. It involves interpersonal comparison of utilities enjoyed by different persons in society. Bergson proceeds to attempt this task with the aid of his social welfare functions, which describe the utility functions of the various persons in society.
In studying social welfare, economists do not generally accept the paternalist or the dictatorial concept as explained above.
Though Robbins and his followers have attempted to keep Economics separate from Ethics, there is a consensus among welfare economists that welfare economics can under no circumstances be kept separate from Ethics. Bergson, Samuelson, Little, and others have reached the conclusion that welfare economics and Ethics must go hand in hand. Value judgments, they point out, cannot be avoided in Welfare Economics.