Question

Can social welfare be measured by “adding up” peoples’ utilities? Why or why not? If not by using the utility, how can policymakers estimate the welfare of government policies?

Answer 1

Social welfare can be measured by adding up peoples' utilities only in case where the benefits to all are distributed in such a way that no person derives utility at the cost of any other. In many of the real cases, this criterion can’t be applied because some policies may bring benefit to somebody at the cost of another. Moreover this situation is free from the possibility of interpersonal comparisons in terms of utility and welfare.

The government cau estimate welfare of government policy by interpersonal comparison of utility or welfare. It is possible through comparing the utility functions of various individuals and this idea is popularly known as the “Social Welfare Function”. In this method utility functions of various individuals is compared. This takes into account of the fact that sometimes one person derives utility at the cost of another.