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Beyond the Ordinal Social Welfare Function

The framework developed and explained in this paper for the social welfare function derivation represents an attempt for the precise, clear and objective social welfare evaluation. The presented social welfare function model importance reflects in its comparability and applicability. With this model application the country’ s social welfare function could not only be presented but also calculated numerically. International comparison within the model is also possible because the welfare level is expressed as a relative number. With the welfare expressed in a value term, a prospect for the welfare planning and attainment is opening. By the welfare and individual state’ s action comparison, it is possible to forecast the action’ s impact on the individual or social welfare. Disaggregating the welfare model, conclusion over individual wealth variation could be set without the subjective ethical judgment existent in the utilitarian model. The central theme of this paper is therefore to explore the evolution 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 paper 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, we 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.

; welfare; social welfare function; ordinal; cardinal utility; welfare measurement.

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