In this book, the main elements of welfare economics are presented in concise form. Welfare economics is that part of economics that, among other things, attempts to explain how to identify and arrive at socially efficient solutions to the resource allocation problems of the national (or local) economy. Expressed in another way, welfare economics tries to reduce the set of alternatives containing the 'best' solution for the economy by eliminating such solutions as can be shown to be inferior to other feasible solutions. The next step - choosing the 'best' or 'optimum' among the alternatives in this reduced set - is a question of subjective values and hence, not within the province of scientific analysis.
The book is primarily intended as a university text for the 'advanced beginner' I believe that large parts of it, however, are accessible to other readers who have a serious interest in the efficiency problems of the economy. It should be observed that Chapters 2, 3 and 4 can each be read independently of the preceding parts of the book. It is difficult, however, to obtain a firm grasp of the contents of the book- and of Chapter 1 in particular - without prior elementary knowledge of microeconomic theory: the theory of the economic behaviour of firms and households. (See the list of literature <it the end of the book for suggested preliminary reading.)
As indicated, the mode of presentation is brief and concise. Readers who prefer extensive explanations with many examples should therefore turn to other texts. In fact, the book is intended as an alternative to the extensive texts already available, an alternative meant to facilitate a cohesive overview of social efficiency problems in general and to expose the basic similarities among the many problems of resource allocation in the local or national economy.
In this revised edition of the book, the text has been expanded on a number of points. Major additions to the first edition can be found in Sections 2.1 (External Effects). 2.5 (Market Disequilibrium), 2.8 (The 'Imperfect' Economy), 3.2.2 (Regional Economic Policy), 4.2.4 (Imperfect Market Prices), 4.3 (The Discounting Problem) and in Appendices I and 2. The single most extensive addition is in section 2.8 which now includes a presentation of the public choice perspective on economic policy.
In the preparation of the book I have benefited from helpful comments by many colleagues. I am indebted to all of them and in particular to William Baumol, Ted Bergstrom, William Branson, Alf Carling, Margareta Johannessen, Edward Gramlich, E. J. Mishan and Lewis Taylor. Julie Sundquist has given valuable assistance in the preparation of the English version of the book.