Social Welfare Functions Can Be Formed in Many Ways

question 22

Essay

Social welfare functions can be formed in many ways. They can be additive, meaning that the all utilities are added together. They can incorporate the idea of maximin, meaning that the utility of the person with the least is maximized. If you were a central planner for an economy, what type of social welfare function would you create?

---

Definitions:

Stagflation

A condition of slow economic growth and relatively high unemployment—a period of stagflation—accompanied by rising prices (inflation).

Misery Index

An economic indicator created by summing the unemployment rate and inflation rate, aiming to provide a snapshot of the average citizen's economic well-being.

Unemployment Rate

The percentage of the total labor force that is unemployed but actively seeking employment and willing to work.

Employed

Employed refers to individuals who are working for pay or profit, engaging in a job or business, within a stipulated period.