We are the 99%

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/We_are_the_99%25 

"We are the 99%" poster referencing the Polish Solidarity movement

 

Occupy Wall Street Poster

 

Protesters with the "99%" T-shirts at Occupy Wall Street on November 17, 2011 near the New York City Hall.

We are the 99% is a political slogan widely used and coined during the 2011 Occupy movement from Gore Vidal's famous and original version "the one percent", meaning the nation's wealthiest 1%, to which the 99% reversely correspond.

The phrase directly refers to the income and wealth inequality in the United States with a concentration of wealth among the top-earning 1%. It reflects an opinion that "the 99%" are paying the price for the mistakes of a tiny minority within the upper class.

According to the Economic Policy Institute as of 2018, all households with incomes less than $737,697 belonged to the lower 99% of wage earners. However, the 1% is not necessarily a reference to top 1% of wage earners, but a reference to the top 1% of individuals by net worth, of which earned wages are only a fraction of the many factors that contribute to their wealth.

Origin

Mainstream accounts

The slogan "We are the 99%" became a unifying slogan of the Occupy movement in August 2011 after a Tumblr blog "wearethe99percent.tumblr.com" was launched in late August 2011 by a 28-year-old New York activist going by the name of "Chris" together with Priscilla Grim.

Chris credited an August 2011 flyer for the NYC assembly "We The 99%" for the term. A 2011 Rolling Stone article attributed to anthropologist David Graeber the suggestion that the Occupy movement represented the 99%. Graeber was sometimes credited with the slogan "We are the 99%" but attributed the full version to others.

Joseph Stiglitz

 

Graph by sociologist Lane Kenworthy showing changes in real US incomes in top 1%, middle 60%, and bottom 20% from 1979 through 2007, tracking household income but not individual incomes.

Mainstream media sources trace the origin of the phrase to economist Joseph Stiglitz's May 2011 article "Of the 1%, by the 1%, for the 1%" in Vanity Fair, in which he was criticizing the economic inequality present in the United States. In the article Stiglitz spoke of the damaging impact of economic inequality involving 1% of the U.S. population owning a large portion of economic wealth in the country, while 99% of the population hold much less economic wealth than the richest 1%:

[I]n our democracy, 1% of the people take nearly a quarter of the nation's income … In terms of wealth rather than income, the top 1% control 40% … [as a result] the top 1% have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn't seem to have bought: an understanding that their fate is bound up with how the other 99% live. Throughout history, this is something that the top 1% eventually do learn. Too late.

Earlier uses of the term "the one percent" to refer to the wealthiest people in society include the 2006 documentary The One Percent (film) about the growing wealth gap between the wealthy elite compared to the overall population, and a 2001 opinion column in the MIT student newspaper The Tech (newspaper).

Other published accounts

More than one publication dates the concept back much further. For instance, the one percent and the 99 percent were explained in a February 1984 article titled "The USA: Who Owns It? Who Runs It?" in Black Liberation Month News, published in Chicago and available online as of 2020.

Even further back, historian Howard Zinn used this concept in "The Coming Revolt of the Guards", the final chapter in the first edition of his book A People's History of the United States published in 1980. "I am taking the liberty of uniting those 99 percent as 'the people'. I have been writing a history that attempts to represent their submerged, deflected, common interest. To emphasize the commonality of the 99 percent, to declare deep enmity of interest with the 1 percent, is to do exactly what the governments of the United States, and the wealthy elite allied to them-from the Founding Fathers to now-have tried their best to prevent."

The 1960 novel Too Many Clients by Rex Stout, part of the Nero Wolfe mystery series, refers to the top two percent: "I know a chairman of the board of a billion-dollar corporation, one of the 2 per cent, [sic] who never gets his shoes shined and shaves three times a week."

The first mention of the concept may very well be found in a poster (circa 1935) advertising the newspaper created by the populist Louisiana politician Huey Long called The American Progress. The second paragraph mentioned the one percent and the ninety-nine percent: "With 1% of our people owning nearly twice as much as all the other 99%, how is a country ever to have permanent progress unless there is a correction of this evil?" 

Variations on the slogan

• "We are the 1 percent; we stand with the 99 percent": by members of the "one percent" who wish to express their support for higher taxes, such as nonprofit organizations Resource Generation and Wealth for the Common Good.
• "We are the 99.9%": by Nobel Prize–winning economist Paul Krugman in an op-ed in The New York Times arguing that the original slogan sets the bar too low when considering recent changes in distribution of income. In particular, Krugman cited a 2005 Congressional Budget Office report indicating that between 1979 and 2005 the inflation-adjusted income for the middle of the income distribution rose 21%, while for the top 0.1% it rose by 400%.
• "We are the 53%": by conservative RedState.com blogger Erick Erickson along with Josh Treviño, communications director for the Texas Public Policy Foundation, and filmmaker Mike Wilson launched in October 2011, in response to the 99% slogan. Erikson referred to the 53% of American workers who pay federal income taxes, and criticizing the 47% of workers who do not pay federal income tax for what Erikson describes as being "subsidized" by those who pay taxes. The Tax Policy Center at the Urban Institute and Brookings Institution both reported that roughly half of the workers who do not pay Federal income tax earn below the tax threshold while the other half pay no income tax due to "provisions that benefit senior citizens and low-income working families with children."
• "We are the 48%": by those who supported the United Kingdom remaining in the European Union after the 2016 referendum on membership, highlighting the relatively even split between supporters of remaining in and withdrawing from the EU.
• "We are the 87%" (German language: "Wir Sind 87 Prozent") : by the German people who did not vote for the far-right Alternative for Germany party in the 2017 German federal election.

Economic context

Main article: Income inequality in the United States

 

Occupy protesters in Oakland holding "We are the 99%"-themed signs

"We are the 99%" is a political slogan and an implicit economic claim of "Occupy" protesters. It refers to the increased concentration of income and wealth since the 1970s among the top 1% of income earners in the United States.

It also reflects an opinion that the "99%" are paying the price for the mistakes of a tiny minority within the upper class.

Studies by the Congressional Budget Office (CBO), the US Department of Commerce, and Internal Revenue Service show that income inequality has grown significantly since the late 1970s, after several decades of stability. Between 1979 and 2007, the top earning 1 percent of Americans have seen their after-tax-and-benefit incomes grow by an average of 275%, compared to around 40–60% for the lower 99 percent. Since 1979 the average pre-tax income for the bottom 90% of households has decreased by $900, while that of the top 1% increased by over $700,000. This imbalance became further exacerbated by changes making federal income taxes less progressive. From 1992-2007 the top 400 income earners in the U.S. saw their income increase 392% and their average tax rate reduced by 37%. In 2009, the average income of the top 1% was $960,000 with a minimum income of $343,927. In 2007 the top 1% had a larger share of total income than at any time since 1928. This is in stark contrast with surveys of US populations that indicate an "ideal" distribution that is much more equal, and a widespread ignorance of the true income inequality and wealth inequality. In 2007, the richest 1% of the American population owned 34.6% of the country's total wealth, and the next 19% owned 50.5%. Thus, the top 20% of Americans owned 85% of the country's wealth and the bottom 80% of the population owned 15% in 2007. Financial inequality measured as the total net worth minus the value of one's home was greater than inequality in total wealth, with the top 1% of the population owning 42.7%, the next 19% of Americans owning 50.3%, and the bottom 80% owning 7% per Forbes in 2011. After the Great Recession started in 2007, the share of total wealth owned by the top 1% of the population grew from 34.6% to 37.1%, and that owned by the top 20% of Americans grew from 85% to 87.7%. Median household wealth dropped by 36.1% compared to a drop of only 11.1% for the top 1%, further widening the gap. During the economic expansion between 2002 and 2007, the income of the top 1% had grown 10 times faster than the income of the bottom 90% and 66% of total income gains went to the 1%.

According to the Economic Policy Institute as of 2018, all households with incomes less than $737,697 belonged to the lower 99% of wage earners.

Data on the minimum yearly income to be considered among the 1% vary per source, ranging from about $500,000 to $1.3 million. This is somewhat below the average compensation range of CEOs whose salaries average $3.9 million according to the AFL-CIO. CEOs salaries average $10.6 million for those whose companies are in the S&P 500 and $19.8 million for companies in the Dow Jones Industrial Average.

A chart showing the disparity in income distribution in the United States. Wealth inequality and income inequality have been central concerns among OWS protesters. CBO data shows that in 1980, the top 1% earned 9.1% of all income, while in 2006 they earned 18.8% of all income.

Following the recession of the late 2000s (decade), the economy in the US continued to experience a jobless recovery. New York Times columnist Anne-Marie Slaughter described pictures on the "We are the 99" website as "page after page of testimonials from members of the middle class who took out loans to pay for education, took out mortgages to buy their houses and a piece of the American dream, worked hard at the jobs they could find, and ended up unemployed or radically underemployed and on the precipice of financial and social ruin." With market uncertainty due to fears of a double-dip recession and the downgrade of the US credit rating in the summer of 2011, the topics of how much the rich pay in taxes and how to solve the nation's economic crisis dominated media commentary. When Congress returned from break, proposed policy solutions came from both major parties as the 2012 Republican presidential debates occurred almost simultaneously with President Obama's September 9 proposal of the American Jobs Act. On September 17, 2011 President Obama announced an economic policy proposal for taxing millionaires known as the Buffett Rule. This immediately led to public statements by House Speaker John Boehner, President Obama, and Republican Mitt Romney over whether the Democrats were fomenting "class warfare".

In November 2011 economist Paul Krugman wrote, that the We are the 99% slogan "correctly defines the issue as being the middle class versus the elite and also gets past the common but wrong notion that rising inequality is mainly about the well educated doing better than the less educated." He questioned whether the slogan ought to refer to the 99.9 percent, as a large fraction of the top 1 percent's gains have actually gone to an even smaller group, the top 0.1 percent—the richest one-thousandth of the population. Krugman argued against the idea that the very rich make a special contribution to the economy as "job creators" as few were new economy innovators like Steve Jobs. He quoted a recent analysis having found that 43% of the top 0.1 percent were executives at non-financial companies, 18% in finance, and another 12% are lawyers or in real estate. Commenting on the ongoing economic crisis he wrote, "[the] seemingly high returns before the crisis simply reflected increased risk-taking—risk that was mostly borne not by the wheeler-dealers themselves, but either by naïve investors or by taxpayers, who ended up holding the bag when it all went wrong".

In general, empirical researches have shown the accuracy of this slogan. Per an Oxfam report, just ahead of the 2015 World Economic Forum: "The combined wealth of the world's richest 1 percent will overtake that of everyone else by next year [2016] given the current trend of rising inequality".

Criticism

We are the 99% protester at Occupy London

CNBC senior markets writer Jeff Cox reacted negatively to the protest movement, calling the 1% are "the most vilified members of American society" who protesters fail to realize includes not only corporate CEOs (31% of the top earning one percent), bankers and stock traders (13.9%), but also doctors (1.85%), real estate professionals (3.2%), entertainers in arts, media and sports (1.6%), professors and scientists (1.8%), lawyers (1.22%), farmers and ranchers (0.5%), and pilots (0.2%). Cox noted that 1 Percenters pay a disproportionate amount of their incomes to taxes, which later research has confirmed. He stated the phenomenon of wealth concentration among a small segment of the population is a century old, and argued a direct correlation between wealth concentration and the health of the stock market, stating that 36.7% of the United States' wealth was controlled by the 1% in 1922, 44.2% when the stock market crashed in 1929, 19.9% in 1976, and has increased since then. Cox wrote that wealth concentration intensified at the same time that the US changed from a manufacturing leader to a financial services leader. Cox took issue with protesters' focus on income and wealth, and with their embrace of rich allies such as actress Susan Sarandon and Russell Simmons, who are themselves in the 1%. Josh Barro of National Review offered similar arguments, asserting that the 1% includes those with incomes beginning at $593,000, which would exclude most Wall Street bankers.

Economist Thomas Sowell noted in November 2011 that IRS data shows the majority of those in the top 1% of income are there for a short period, and that age was more associated with wealth concentration than was income. Sowell further argued that analyzing data about abstract categories (like income brackets) should not be confused with analyzing data about individuals (who can move in and out of various abstract categories, like income brackets, throughout their lives):

"It is easier and cheaper to collect statistics about income brackets than it is to follow actual flesh-and-blood people as they move massively from one income bracket to another over the years.
More important, statistical studies that follow particular individuals over the years often reach diametrically opposite conclusions from those reached by statistical studies that follow income brackets over the years."

Economic professor Sean Mulholland argued in 2012 that the idea that the richer have become richer while the poor have become poorer is false because data showing that the richest income earners grew significantly richer over the same period that members of poorer classes maintained a fairly constant income rate does not account for the upward and downward economic mobility of particular households over recent decades.

In the US, Republicans have generally been critical of the movement accusing protesters and their supporters of class warfare. Newt Gingrich called the "concept of the 99 and the one" both divisive and "un-American". Democrats have offered "cautious support", using the "99%" slogan to argue for the passage of President Obama's jobs act, Internet access rules, voter identification laws, mine safety, and other issues. Both parties agree that the movement has changed public debate. In December 2011, the New York Times reported that "Whatever the long-term effects of the Occupy Movement, protesters succeeded in implanting "we are the 99 percent" ... into the cultural and political lexicon."

New Continental Congress

After the Occupy movement activists' camps started getting uprooted, the Occupy movement came back online proposing a new United States Declaration of Independence from corporations, along with a new Continental Congress in Philadelphia.

See also

• 99 Percent Declaration
• 99ers
• Affluence in the United States
• American upper class
• Bank Transfer Day
• Basket of deplorables
• Distribution of wealth
• High-net-worth individual
• Household income in the United States
• How the Other Half Lives
• Income inequality in the United States
• Let Wall Street Pay for the Restoration of Main Street Bill
• Lobby 99
• Mitt Romney's 47% Comment
• Occupy movement
• Occupy Wall Street
• Oligarchy
• Plutocracy
• Two Americas
• Upper ten thousand
• Wealth in the United States
• Wealth inequality in the United States

Critical juncture theory

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Critical_juncture_theory 

Critical juncture theory focuses on critical junctures, i.e., large, rapid, discontinuous changes, and the long-term causal effect or historical legacy of these changes. Critical junctures are turning points that alters the course of evolution of some entity (e.g., a species, a society). Critical juncture theory seeks to explain both (1) the historical origin and maintenance of social order, and (2) the occurrence of social change through sudden, big leaps.

Critical juncture theory is not a general theory of social order and change. It emphasizes one kind of cause (involving a big, discontinuous change) and kind of effect (a persistent effect). Yet, it challenges some common assumptions in many approaches and theories in the social sciences. The idea that some changes are discontinuous sets it up as an alternative to (1) "continuist" or "synechist" theories that assume that change is always gradual or that natura non facit saltus – Latin for "nature does not make jumps." The idea that such discontinuous changes have a long-term impact stands in counterposition to (2) "presentist" explanations that only consider the possible causal effect of temporally proximate factors.

Theorizing about critical junctures began in the social sciences in the 1960s. Since then, it has been central to a body of research in the social sciences that is historically informed. Research on critical junctures in the social sciences is part of the broader tradition of comparative historical analysis and historical institutionalism. It is a tradition that spans political science, sociology and economics. Within economics, it shares an interest in historically oriented research with the new economic history or cliometrics. Research on critical junctures is also part of the broader "historical turn" in the social sciences.

Origins in the 1960s and early 1970s

The idea of episodes of discontinuous change, followed by periods of relative stability, was introduced in various fields of knowledge in the 1960s and early 1970s."

Kuhn's paradigm shifts

Philosopher of science Thomas Kuhn's landmark work The Structure of Scientific Revolutions (1962) introduced and popularized the idea of discontinuous change and the long-term effects of discontinuous change. Kuhn argued that progress in knowledge occurs at times through sudden jumps, which he called paradigm shifts. After paradigm shifts, scholars do normal science within paradigms, which endure until a new revolution came about.

Kuhn challenged the conventional view in the philosophy of science at the time that knowledge growth could be understood entirely as a process of gradual, cumulative growth.

Gellner's neo-episodic model of change

Anthropologist Ernest Gellner proposed a neo-episodic model of change in 1964 that highlights the "step-like nature of history" and the "remarkable discontinuity" between different historical periods. Gellner contrasts the neo-episodic model of change to an evolutionary model that portrays "the pattern of Western history" as a process of "continuous and sustained and mainly endogenous upward growth."

Sociologist Michael Mann adapted Gellner's idea of "'episodes' of major structural transformation" and called such episodes "power jumps."

Lipset and Rokkan's critical junctures

Sociologist Seymour Lipset and political scientist Stein Rokkan introduced the idea of critical junctures and their long-term impact in the social sciences in 1967. The ideas presented in the coauthored 1967 work were elaborated by Rokkan in Citizens, Elections, and Parties (1970).

Gellner had introduced a similar idea in the social sciences. However, Lipset and Rokkan offered a more elaborate model and an extensive application of their model to Europe (see below). Although Gellner influenced some sociologists, the impact of Lipset and Rokkan on the social sciences was greater.

Gould's model of sudden, punctuated change (bottom image) contrasts with the view that change is always gradual (top image).

Gould's punctuated equilibrium model

Kuhn's ideas influenced paleontologist Stephen Jay Gould, who introduced the idea of punctuated equilibrium in the field of evolutionary biology in 1972. Gould's initial work on punctuated equilibrium was coauthored with Niles Eldredge.

Gould's model of punctuated equilibrium drew attention to episodic bursts of evolutionary change followed by periods of morphological stability. He challenged the conventional model of gradual, continuous change - called phyletic gradualism.

The critical juncture theoretical framework in the social sciences

Since its launching in 1967, research on critical junctures has focused in part on developing a theoretical framework, which has evolved over time.

In studies of society, some scholars use the term "punctuated equilibrium" model, and others the term "neo-episodic" model. Studies of knowledge continue to use the term "paradigm shift". However, these terms can be treated as synonyms for critical juncture.

Developments in the late 1960s–early 1970s

Key ideas in critical junctures research were initially introduced in the 1960s and early 1970s by Seymour Lipset, Stein Rokkan, and Arthur Stinchcombe.

Critical junctures and legacies

Stein Rokkan, coauthor of "Cleavage Structures, Party Systems, and Voter Alignments."

Seymour Lipset and Stein Rokkan (1967) and Rokkan (1970) introduced the idea that big discontinuous changes, such as the reformation, the building of nations, and the industrial revolution, reflected conflicts organized around social cleavages, such as the center-periphery, state-church, land-industry, and owner-worker cleavages. In turn, these big discontinuous changes could be seen as critical junctures because they generated social outcomes that subsequently remained "frozen" for extensive periods of time.

In more general terms, Lipset and Rokkan's model has three components:

•  (1) Cleavage. Strong and enduring conflicts that polarize a political system. Four such cleavages were identified:
  • The center–periphery cleavage, a conflict between a central nation-building culture and ethnically linguistically distinct subject populations in the peripheries.
  • The state–church cleavage, a conflict between the aspirations of a nation-state and the church.
  • The land–industry cleavage, a conflict between landed interests and commercial/industrial entrepreneurs.
  • The worker–employer cleavage, a conflict between owners and workers.
•  (2) Critical juncture. Radical changes regarding these cleavages happen at certain moments.
•  (3) Legacy. Once these changes occur, their effect endures for some time afterwards.

Rokkan (1970) added two points to these ideas. Critical junctures could set countries on divergent or convergent paths. Critical junctures could be "sequential," such that a new critical junctures does not totally erase the legacies of a previous critical juncture but rather modifies that previous legacy.

The reproduction of legacies through self-replicating causal loops

Arthur Stinchcombe (1968) filled a key gap in Lipset and Rokkan's model. Lipset and Rokkan argued that critical junctures produced legacies, but did not explain how the effect of a critical juncture could endure over a long period.

Stinchcombe elaborated the idea of historical causes (such as critical junctures) as a distinct kind of cause that generates a "self-replicating causal loop." Stinchcombe explained that the distinctive feature of such a loop is that "an effect created by causes at some previous period becomes a cause of that same effect in succeeding periods." This loop was represented graphically by Stinchcombe as follows:

   X t1 ––> Y t2 ––> D t3 ––> Y t4 ––> D t5 ––> Y t6

Stinchcombe argued that the cause (X) that explains the initial adoption of some social feature (Y) was not the same one that explains the persistence of this feature. Persistence is explained by the repeated effect of Y on D and of D on Y.

Developments in the early 1980s–early 1990s

Additional contributions were made in the 1980s and early 1990s by various political scientists and economists.

Douglass North, coauthor of Institutions, Institutional Change and Economic Performance.

Punctuated equilibrium, path dependence, and institutions

Paul A. David and W. Brian Arthur, two economists, introduced and elaborated the concept of path dependence, the idea that past events and decisions affect present options and that some outcomes can persist due to the operation of a self-reinforcing feedback loop. This idea of a self-reinforcing feedback loop resembles that of a self-replicating causal loop introduced earlier by Stinchcombe. However, it resonated with economists and led to a growing recognition in economics that "history matters."

The work by Stephen Krasner in political science incorporated the idea of punctuated equilibrium into the social sciences. Krasner also drew on the work by Arthur and connected the idea of path dependence to the study of political institutions.

Douglass North, an economist and Nobel laureate, applied the idea of path dependence to institutions, which he defined as "the rules of the game in a society," and drew attention to the persistence of institutions.

David Collier, coauthor of Shaping the Political Arena.

A synthesis

Political scientists Ruth Berins Collier and David Collier, in Shaping the Political Arena (1991), provided a synthesis of many ideas introduced from the 1960s to 1990, in the form of the following "five-step template":

   Antecedent Conditions ––> Cleavage or Shock ––> Critical Juncture 
    ––> Aftermath ––> Legacy

These key concepts have been defined as follows:

• (1) "Antecedent conditions are diverse socioeconomic and political conditions prior to the onset of the critical juncture that constitute the baseline for subsequent change."
• (2) "Cleavages, shocks, or crises are triggers of critical junctures."
• (3) "Critical junctures are major episodes of institutional change or innovation."
• (4) "The aftermath is the period during which the legacy takes shape."
• (5) "The legacy is an enduring, self-reinforcing institutional inheritance of the critical juncture that stays in place and is stable for a considerable period."

Debates in the 2000s–2010s

Following a period of consolidation of critical junctures framework, few new developments occurred in the 1990s. However, since around 2000, several new ideas were proposed and many aspects of the critical junctures framework are the subject of debate.

Critical junctures and incremental change

An important new issue in the study of change is the relative role of critical junctures and incremental change. On the one hand, the two kinds of change are sometimes starkly counterposed. Kathleen Thelen emphasizes more gradual, cumulative patterns of institutional evolution and holds that "the conceptual apparatus of path dependence may not always offer a realistic image of development." On the other hand, path dependence, as conceptualized by Paul David is not deterministic and leaves room for policy shifts and institutional innovation.

Critical junctures and contingency

Einar Berntzen notes another debate: "Some scholars emphasize the historical contingency of the choices made by political actors during the critical juncture." For example, Michael Bernhard writes that critical junctures "are periods in which the constraints of structure have weakened and political actors have enhanced autonomy to restructure, overturn, and replace critical systems or sub-systems."

However, Berntzen holds that "other scholars have criticized the focus on agency and contingency as key causal factors of institutional path selection during critical junctures" and "argue that a focus on antecedent conditions of critical junctures is analytically more useful." For example, Dan Slater and Erica Simmons place a heavy emphasis on antecedent conditions.

Legacies and path dependence

The use of the concept of path dependence in the study of critical junctures has been a source of some debate. On the one hand, James Mahoney argues that "path dependence characterizes specifically those historical sequences in which contingent events set into motion institutional patterns or event chains that have deterministic properties" and that there are two types of path dependence: "self-reinforcing sequences" and "reactive sequences." On the other hand, Kathleen Thelen and other criticize the idea of path dependence determinism, and Jörg Sydow, Georg Schreyögg, and Jochen Koch question the idea of reactive sequences as a kind of path dependence.

Institutional and behavioral path dependence

The study of critical junctures has commonly been seen as involving a change in institutions. However, many works extend the scope of research of critical junctures by focusing on changes in culture. Avidit Acharya, Matthew Blackwell, and Maya Sen state that the persistence of a legacy can be "reinforced both by formal institutions, such as Jim Crow laws (a process known as institutional path dependence), and also by informal institutions, such as family socialization and community norms (a process we call behavioral path dependence."

Substantive applications in the social sciences

Topics and processes

A critical juncture approach has been used in the study of many fields of research: state formation, political regimes, regime change and democracy, party system, public policy, government performance, and economic development.

In addition, many processes and events have been identified as critical junctures.

The domestication of animals is commonly treated as a turning point in world history. The image depicts an Egyptian hieroglyphic painting showing an early instance of a domesticated animal.

Pre-1760 power jumps

Michael Mann, in The Sources of Social Power (1986), relies on Gellner's neo-episodic model of change and identifies a series of "power jumps" in world history prior to 1760 - the idea of power jumps is similar to that of a critical juncture. Some of the examples of power jumps identified by Mann are:

• The domestication of animals and the development of agriculture
• Law codes in written form
• The military revolution
• The use of Hoplites and phalanxes in war.
• The creation of the polis
• The diffusion of literacy
• The formation of modern states

The end of the Cold War in 1989 is one among many turning points studied as a critical juncture.

Modern era critical junctures

Some of the processes in the modern era that are commonly seen as critical junctures in the social sciences are:

• State formation.
• The Industrial Revolution.
• Political and social revolutions, such as the Glorious Revolution of 1688, the French Revolution of 1789, and the Russian Revolution of 1917.
• Wars, such as World War I and World War II
• Colonialism and decolonization.
• The end of slavery.
• Transitions to mass politics.
• Transitions to democracy.
• The Trente Glorieuses - the 30 years from 1945 to 1975 in Europe.
• The transition to neoliberalism in the 1980s and 1990s.
• The end of the Cold War in 1989.

Considerable discussion has focused on the possibility that the COVID-19 pandemic will be a critical juncture.

Examples of research

Barrington Moore Jr.'s Social Origins of Dictatorship and Democracy: Lord and Peasant in the Making of the Modern World (1966) argues that revolutions (the critical junctures) occurred in different ways (bourgeois revolutions, revolutions from above, and revolutions from below) and this difference led to contrasting political regimes in the long term (the legacy)—democracy, fascism, and communism, respectively. In contrast to the unilinear view of evolution common in the 1960s, Moore showed that countries followed multiple paths to modernity.

Collier and Collier's Shaping the Political Arena: Critical Junctures, the Labor Movement, and the Regime Dynamics in Latin America (1991) compares "eight Latin American countries to argue that labor-incorporation periods were critical junctures that set the countries on distinct paths of development that had major consequences for the crystallization of certain parties and party systems in the electoral arena. The way in which state actors incorporated labor movements was conditioned by the political strength of the oligarchy, the antecedent condition in their analysis. Different policies towards labor led to four specific types of labor incorporation: state incorporation (Brazil and Chile), radical populism (Mexico and Venezuela), labor populism (Peru and Argentina), and electoral mobilization by a traditional party (Uruguay and Colombia). These different patterns triggered contrasting reactions and counter reactions in the aftermath of labor incorporation. Eventually, through a complex set of intermediate steps, relatively enduring party system regimes were established in all eight countries: multiparty polarizing systems (Brazil and Chile), integrative party systems (Mexico and Venezuela), stalemated party systems (Peru and Argentina), and systems marked by electoral stability and social conflict (Uruguay and Colombia)."

John Ikenberry's After Victory: Institutions, Strategic Restraint, and the Rebuilding of Order After Major Wars (2001) compares post-war settlements after major wars – following the Napoleonic Wars in 1815, the world wars in 1919 and 1945, and the end of the Cold War in 1989. It argues that "international order has come and gone, risen and fallen across historical eras" and that the "great moments of order building come after major wars – 1648, 1713, 1815, 1919, 1945, and 1989." In essence, peace conferences and settlement agreements put in place "institutions and arrangements for postwar order." Ikenberry also shows that "the actual character of international order has varied across eras and order building moments" and that "variations have been manifest along multiple dimensions: geographic scope, organizational logic, rules and institutions, hierarchy and leadership, and the manner in and degree to which coercion and consent undergird the resulting order."

Daron Acemoglu and James A. Robinson’s Why Nations Fail: The Origins of Power, Prosperity, and Poverty (2012) draws on the idea of critical junctures. A key thesis of this book is that, at critical junctures (such as the Glorious Revolution in 1688 in England), countries start to evolve along different paths. Countries that adopt inclusive political and economic institutions become prosperous democracies. Countries that adopt extractive political and economic institutions fail to develop political and economically.

Sebastián L. Mazzuca's Latecomer State Formation. Political Geography and Capacity Failure in Latin America (2021) compares state formation in Latin America and Europe. A key argument is that state formation in Latin America was trade-led rather than war-led and that this difference explains why Latin American states have low state capacity relative to their European counterparts. In early modern western Europe, Mazzuca argues, "state formation had multiple linkages to state building. Violence monopolization required great efforts at fiscal extraction, which in turn caused the abolition of the intermediary power of local potentates and incited social demands for new public goods." In contrast, in Latin America, "the obstacles to the development of state capacities were the result of mutually convenient bargains struck by central state-makers and peripheral potentates, who, far from being eliminated during state formation, obtained institutional power to reinforce local bastions."

Debates in research

Critical juncture research typically contrasts an argument about the historical origins of some outcome to an explanation based in temporally proximate factors. However, researchers have engaged in debates about what historical event should be considered a critical juncture.

The rise of the West

A key debate in research on critical junctures concerns the turning point that led to the rise of the West.

• Jared Diamond, in Guns, Germs and Steel (1997) argues that the development reaching back to around 11,000 BCE explain why key breakthroughs were made in the West rather than in some other region of the world.
• Michael Mitterauer, in Why Europe? The Medieval Origins of its Special Path (2010) traces the rise of the West to developments in the Middle Ages.
•  Daron Acemoglu and James A. Robinson, in Why Nations Fail: The Origins of Power, Prosperity, and Poverty (2012) and The Narrow Corridor. States, Societies, and the Fate of Liberty (2019) argue that a critical juncture during the early modern age is what set the West on its distinctive path.

Historical sources of economic development (with a focus on Latin America)

Another key debate concerns the historical roots of economic development, a debate that has address Latin America in particular.

• Jerry F. Hough and Robin Grier (2015) claim that "key events in England and Spain in the 1260s explain why Mexico lagged behind the United States economically in the 20th century."
• Works by Daron Acemoglu, Simon H. Johnson, and James A. Robinson (2001); James Mahoney (2010); and Stanley Engerman and Kenneth Sokoloff (2012) focus on colonialism as the key turning point explaining long-term economic trajectories.
• Sebastián L. Mazzuca (2017) claims that the relatively poor economic performance of Latin American countries is not due to some colonial heritage but rather "to the juncture of state formation."
• Rudiger Dornbusch and Sebastián Edwards (1991) see the emergence of mass politics in the mid-20th century as the key turning point that explains the economic performance of Latin America.

Historical origins of the Asian developmental state

Research on Asia includes a debate about the historical roots of developmental states.

• Atul Kohli (2004) argues that developmental states originate in the colonial period.
• Tuong Vu (2010) maintains that developmental states originate in the post-colonial period.

Reception and impact

Research on critical junctures is generally seen as an important contribution to the social sciences.

Within political science, Berntzen argues that research on critical junctures "has played an important role in comparative historical and other macro-comparative scholarship." Some of the most notable works in the field of comparative politics since the 1960s rely on the concept of a critical juncture.

Barrington Moore Jr.'s Social Origins of Dictatorship and Democracy. Lord and Peasant in the Making of the Modern World (1966) is broadly recognized as a landmark study in the study of democratization.

Robert D. Putnam's Making Democracy Work: Civic Traditions in Modern Italy (1993) provides an analysis of the historical origins of social capital in Italy that is widely credited with launching a strand of research on social capital and its consequences in various fields within political science.

Frank Baumgartner and Bryan D. Jones's Agendas and Instability in American Politics (2009) is credited with having "a massive impact in the study of public policy."

Within economics, the historically informed work of Douglass North, and Daron Acemoglu and James A. Robinson, is seen as partly responsible for the disciple's renewed interest in political institutions and the historical origins of institutions and hence for the revival of the tradition of institutional economics.

See also

• American political development
• Cliodynamics
• Cliometrics
• Comparative historical research
• Economic history
• Historical institutionalism
• Historical sociology
• Institutional economics
• Neoevolutionism
• New institutionalism
• Path dependence
• Political realignment
• Punctuated equilibrium
• Sociocultural evolution

 

Broad measures of economic progress

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Broad_measures_of_economic_progress 

Although for many decades, it was customary to focus on GDP and other measures of national income, there has been growing interest in developing broad measures of economic well-being. National and international approaches include the Beyond GDP programme developed by the European Union, the Better Lives Compendium of Indicators developed by the OECD, as well as many alternative metrics of wellbeing or happiness. One of the earliest attempts to develop such an index at national level was Bhutan's Gross National Happiness Index and there are a now a number of similar projects ongoing around the world, including a project to develop for the UK an assessment of national well-being, commissioned by the Prime Minister David Cameron and led by the Office for National Statistics.

GNH

The GNH phrase was initially used as an off-hand remark by the King of Bhutan to indicate his lack of interest in western materialistic style of economic development. The implementation of the GNH philosophy was meant to prohibit TV and Jeans from becoming part of the culture of the Bhutanese population. Despite modernization of the GNH concept by Karma Ura, Up to date the GNH is seen by some to hide some values that are in contradiction to western lifestyle.

In 2005, a US based think tank, the International Institute of Management, published a working paper followed by a policy white paper in 2006 calling for the implementation of GNH philosophy in the United States. The papers called for a secular and more scientific implementation of a public policy framework and econometric measurement tool also known as Gross National Well-being or GNW and launched the first secular global gross national happiness index survey. Despite, the differences in the visions, both papers credited the King of Bhutan for the inspiration.

The American GNH framework and GNH Index Survey was referenced by various researchers and policy makers as an answer to the failures of unchecked capitalism and hyper-focus on GDP. Among the prominent proposals was a report to US congress, UK Prime Minister Office, and Government of Goa.

Later happiness and well-being development frameworks were similar to the proposal. For example the Bhutan GNH Index published in 2012 after 2 years of research was not dissimilar from the first secular GNH framework and Index of 2005. The main difference was the addition of spiritual elements such as Karma and prayers indicators to fit the local Bhutanese culture. The Bhutan GNH philosophy was initially dismissed due to its generality and was considered as touchy-feely concept, but later taken seriously after it published an econometric framework.

Beyond GDP

In 2007, the European Commission, the European Parliament, Club of Rome, OECD and WWF hosted a conference titled "Beyond GDP". The consensus was to widen measures of economic growth and come up with measures that can inform policy making. The conference was attended by over 650 policy makers, experts and social activists. Spurred by its success the European Union released a communication titled GDP and beyond: Measuring progress in a changing world that identified five actions to improve the indicators of progress in ways that make it more responsive to the concerns of its citizens:

• Complementing GDP with highly aggregated environmental and social indicators
• Near real-time information for decision-making
• More accurate reporting on distribution and inequalities
• Developing a European sustainable development scoreboard
• Extending national accounts to environmental and social issues.

Following this communication and its adoption by the European Parliament in June 2008, many European governments and policy makers have started work on developing new measures of economic development.

In August 2013, the European Commission published the Staff Working Document on "Progress on 'GDP and beyond' actions" , in which reviews what had been achieved on the five steps identified in the communication GDP and beyond: Measuring progress in a changing world. Some of the most significant actions taken include:

• The European Statistical System adopted the first set of indicators on 'quality of life and well-being' and it also decided for the EU-SILC (EU Statistics on Income and Living Conditions) to be the core instrument for building up such indicators.
• The time taken to publish key environmental indicators such as greenhouse gas emissions has been shortened by as much as eight months by using advanced statistical methods to arrive at so-called 'early estimates', which have proven to be sufficiently accurate to inform policy decisions. Since 2012, Eurostat has produced 'early estimates'—within four months—for CO2 emissions from energy use.
• A consensus has not been reached on the EU Sustainable Development Scoreboard. However, a preliminary scoreboard of resource efficiency indicators (REI) is currently being tested and discussed.
• The EU actively supported the finalisation and adoption by the United Nations Statistical Commission (UNSC) of the System of Environmental Economic Accounting (SEEA) as the international statistical standard.
• Since 2010, European statistics have been published on 'annual adjusted disposable income in purchasing power standards' and the quarterly 'real disposable income of households'.
• Summary indices on poverty and human development have been calculated for all 277 European regions.

In addition, the European Commission provides a list of different indicators that can be categorised into five categories :

• GDP and other macro-economic indicators - provided by the System of National Accounts (SNA).
• Enlarged GDP measures - include costs such as expense of environmental degradation, resource depletion or higher income inequality. They provide a more accurate indication of a country's actual economic, environmental and social performance.
• Social indicators – combine several aspects of social progress.
• Environmental indicators – relate to the environmental development and linked issues such as human health.
• Well-being – include both subjective and objective measures to report on quality of life and life satisfaction.

Measuring national well-being in the UK

In 2010 the Measuring National Well-being programme was launched in the UK. It is led by the Office for National Statistics (ONS) and its aim is to develop accepted and trusted measures of the well-being of the nation.

Following a national debate in 2011 asking “what matters” to the general public, the programme has published a series of releases on experimental methodology such as the value of the non-market production of households collected in the Household Satellite Accounts and ad-hoc analysis like the Commuting and Personal Well-being release. It has also established a series of periodic publications. For example, the Human Capital estimates and the Life in the UK report are published annually.

The Life in the UK report was first published in November 2012 and included the National Well-being Wheel of measures, which is being updated twice a year, with the May 2014 update being the latest. The wheel includes headline indicators in areas such as health, relationships, job satisfaction, economic security, education, environmental conditions and measures of 'personal well-being' (individuals' assessment of their own well-being).

A Summary of National Well-being Measures from March 2014

 

National Well-being Wheel of measures

The programme will continue developing and improving the measurement of the well-being of the citizens in the United Kingdom in order to report on the findings to inform both public debate and policy-making.

World Bank

The World Bank suggests the usage of Human Development Index (HDI) and the Gross National Happiness Index (NHI). The HDI is a composite index of

1. life expectancy at birth, as an index of population health and longevity,
2. knowledge and education as measured by the adult literacy rate and functions of school enrollment rate and
3. standard of living measured as a logarithmic function of GDP, adjusted to purchasing power parity.

The NHI focuses on the spiritual and material development of human beings by focussing on the four pillars of sustainable development, preservation of cultural values, conservation of natural resources and establishment of good governance. The bank also notes suggestions made by President Nicholas Sarkozy for the modification of the definition of GDP that stops the social and cultural damage that the current definitions are leading to. The Bank also suggests Adjusted Net Savings as an alternative to GDP.

Suggested measures

Some other measures that have been suggested as a replacement of GDP are Index of Sustainable Economic Welfare (ISEW) as suggested by Friends of the Earth, Environmentally Sustainable National Income (eSNI) by Dr. Hueting,

See also

Bhutan GNH Index Disability-adjusted life year Economics Green national product Gender Development Index Genuine progress indicator Green gross domestic product Gross National Happiness Gross National Well-being Happiness economics Happy Planet Index Human Development Index Index of Sustainable Economic Welfare

Progress (history) Progressive utilization theory Legatum Prosperity Index Leisure satisfaction Money-rich, time-poor OECD Better Life Index Post-materialism Psychometrics Subjective life satisfaction Where-to-be-born Index Wikiprogress World Happiness Report World Values Survey

Welfare economics

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Welfare_economics 

Welfare economics is a branch of economics that uses microeconomic techniques to evaluate well-being (welfare) at the aggregate (economy-wide) level.

Attempting to apply the principles of welfare economics gives rise to the field of public economics, the study of how government might intervene to improve social welfare. Welfare economics also provides the theoretical foundations for particular instruments of public economics, including cost–benefit analysis, while the combination of welfare economics and insights from behavioral economics has led to the creation of a new subfield, behavioral welfare economics.

The field of welfare economics is associated with two fundamental theorems. The first states that given certain assumptions, competitive markets produce (Pareto) efficient outcomes; it captures the logic of Adam Smith's invisible hand. The second states that given further restrictions, any Pareto efficient outcome can be supported as a competitive market equilibrium. Thus a social planner could use a social welfare function to pick the most equitable efficient outcome, then use lump sum transfers followed by competitive trade to bring it about. Because of welfare economics' close ties to social choice theory, Arrow's impossibility theorem is sometimes listed as a third fundamental theorem.

A typical methodology begins with the derivation (or assumption) of a social welfare function, which can then be used to rank economically feasible allocations of resources in terms of the social welfare they entail. Such functions typically include measures of economic efficiency and equity, though more recent attempts to quantify social welfare have included a broader range of measures including economic freedom (as in the capability approach).

Approaches

Main articles: Social welfare function and welfare definition of economics

Cardinal utility

See also: cardinal utility

The early Neoclassical approach was developed by Edgeworth, Sidgwick, Marshall, and Pigou. It assumes the following:

• Utility is cardinal, that is, scale-measurable by observation or judgment.
• Preferences are exogenously given and stable.
• Additional consumption provides smaller and smaller increases in utility (diminishing marginal utility).
• All individuals have interpersonally commensurable utility functions (an assumption that Edgeworth avoided in his Mathematical Psychics).

With these assumptions, it is possible to construct a social welfare function simply by summing all the individual utility functions. Note that such a measure would still be concerned with the distribution of income (distributive efficiency) but not the distribution of final utilities. In normative terms, such authors were writing in the Benthamite tradition.

Ordinal utility

See also: ordinal utility

The New Welfare Economics approach is based on the work of Pareto, Hicks, and Kaldor. It explicitly recognizes the differences between the efficiency aspect of the discipline and the distribution aspect and treats them differently. Questions of efficiency are assessed with criteria such as Pareto efficiency and the Kaldor–Hicks compensation tests, while questions of income distribution are covered in social welfare function specification. Further, efficiency dispenses with cardinal measures of utility, replacing it with ordinal utility, which merely ranks commodity bundles (with an indifference-curve map, for example).

Criteria

Efficiency

Situations are considered to have distributive efficiency when goods are distributed to the people who can gain the most utility from them.

Pareto efficiency is a useful efficiency goal that is standard in economics. A situation is Pareto-efficient only if no individual can be made better off without making someone else worse off. An example of an inefficient situation would be if Smith owns an apple but would prefer to consume an orange while Jones owns an orange but would be prefer to consume an apple. Both could be made better off by trading.

A pareto-efficient state of affairs can only come about if four criteria are met:

• The marginal rates of substitution in consumption for any two goods are identical for all consumers. We cannot reallocate goods between two consumers and make both happier.
• The marginal rate of transformation in production for any two goods is identical for all producers of those two goods. We cannot reallocate production between two producers and increase total output.
• The marginal physical product of a factor input (e.g. labor) must be the same for all producers of a good. We cannot reduce production cost by reallocating production between two producers.
• The marginal rates of substitution in consumption equal the marginal rates of transformation in production for any pair of goods. Producers cannot make consumers happier by producing more of one good and less of the other.

There are a number of conditions that lead to inefficiency. They include:

• Imperfect market structures such as monopoly, monopsony, oligopoly, oligopsony, and monopolistic competition.
• Factor allocation inefficiencies in production theory basics.
• Externalities.
• Asymmetric information, including principal–agent problems.
• Long run declining average costs in a natural monopoly.
• Taxes and tariffs.
• Government restrictions on prices and quantities sold and other regulation resulting from government failure.

Note that if one of these conditions leads to inefficiency, another condition might help by counteracting it. For example, if a pollution externality leads to overproduction of tires, a tax on tires might restore the efficient level of production. A condition inefficient in the "first-best" might be desirable in the second-best.

To determine whether an activity is moving the economy towards Pareto efficiency, two compensation tests have been developed. Policy changes usually help some people while hurting others, so these tests ask what would happen if the winners were to compensate the losers. Using the Kaldor criterion, the change is desirable if the maximum amount the winners would be willing to pay is greater than the minimum the losers would accept. Under the Hicks criterion, the change is desirable if the maximum the losers would be willing to offer the winners to prevent the change is less than the minimum the winners would accept as a bribe to give up the change. The Hicks compensation test is from the losers' point of view; the Kaldor compensation test is from the winners'. If both conditions are satisfied, the proposed change will move the economy toward Pareto optimality. This idea is known as Kaldor–Hicks efficiency. If the two conditions disagree, that yields the Scitovsky paradox.

Equity

There are many combinations of consumer utility, production mixes, and factor input combinations consistent with efficiency. In fact, there are an infinity of consumption and production equilibria that yield Pareto optimal results. There are as many optima as there are points on the aggregate production–possibility frontier. Hence, Pareto efficiency is a necessary, but not a sufficient condition for social welfare. Each Pareto optimum corresponds to a different income distribution in the economy. Some may involve great inequalities of income. So how do we decide which Pareto optimum is most desirable? This decision is made, either tacitly or overtly, when we specify the social welfare function. This function embodies value judgements about interpersonal utility. The social welfare function shows the relative importance of the individuals that comprise society.

A utilitarian welfare function (also called a Benthamite welfare function) sums the utility of each individual in order to obtain society's overall welfare. All people are treated the same, regardless of their initial level of utility. One extra unit of utility for a starving person is not seen to be of any greater value than an extra unit of utility for a millionaire. At the other extreme is the Max-Min, or Rawlsian utility function. According to the Max-Min criterion, welfare is maximized when the utility of those society members that have the least is the greatest. No economic activity will increase social welfare unless it improves the position of the society member that is the worst off. Most economists specify social welfare functions that are intermediate between these two extremes.

The social welfare function is typically translated into social indifference curves so that they can be used in the same graphic space as the other functions that they interact with. A utilitarian social indifference curve is linear and downward sloping to the right. The Max-Min social indifference curve takes the shape of two straight lines joined so as they form a 90-degree angle. A social indifference curve drawn from an intermediate social welfare function is a curve that slopes downward to the right.

The intermediate form of social indifference curve can be interpreted as showing that as inequality increases, a larger improvement in the utility of relatively rich individuals is needed to compensate for the loss in utility of relatively poor individuals.

A crude social welfare function can be constructed by measuring the subjective dollar value of goods and services distributed to participants in the economy.

Fundamental theorems

Main article: Fundamental theorems of welfare economics

The field of welfare economics is associated with two fundamental theorems. The first states that given certain assumptions, competitive markets (price equilibria with transfers, e.g. Walrasian equilibria) produce Pareto efficient outcomes. The assumptions required are generally characterised as "very weak". More specifically, the existence of competitive equilibrium implies both price-taking behaviour and complete markets, but the only additional assumption is the local non-satiation of agents' preferences – that consumers would like, at the margin, to have slightly more of any given good. The first fundamental theorem is said to capture the logic of Adam Smith's invisible hand, though in general there is no reason to suppose that the "best" Pareto efficient point (of which there are a set) will be selected by the market without intervention, only that some such point will be.

The second fundamental theorem states that given further restrictions, any Pareto efficient outcome can be supported as a competitive market equilibrium. These restrictions are stronger than for the first fundamental theorem, with convexity of preferences and production functions a sufficient but not necessary condition. A direct consequence of the second theorem is that a benevolent social planner could use a system of lump sum transfers to ensure that the "best" Pareto efficient allocation was supported as a competitive equilibrium for some set of prices. More generally, it suggests that redistribution should, if possible, be achieved without affecting prices (which should continue to reflect relative scarcity), thus ensuring that the final (post-trade) result is efficient. Put into practice, such a policy might resemble predistribution.

Because of welfare economics' close ties to social choice theory, Arrow's impossibility theorem is sometimes listed as a third fundamental theorem.

Social welfare maximization

Utility functions can be derived from the points on a contract curve. Numerous utility functions can be derived, one for each point on the production possibility frontier (PQ in the diagram above). A social utility frontier (also called a grand utility frontier) can be obtained from the outer envelope of all these utility functions. Each point on a social utility frontier represents an efficient allocation of an economy's resources; that is, it is a Pareto optimum in factor allocation, in production, in consumption, and in the interaction of production and consumption (supply and demand). In the diagram below, the curve MN is a social utility frontier. Point D corresponds with point C from the earlier diagram. Point D is on the social utility frontier because the marginal rate of substitution at point C is equal to the marginal rate of transformation at point A. Point E corresponds with point B in the previous diagram, and lies inside the social utility frontier (indicating inefficiency) because the MRS at point C is not equal to the MRT at point A.

Although all the points on the grand social utility frontier are Pareto efficient, only one point identifies where social welfare is maximized. Such point is called "the point of bliss". This point is Z where the social utility frontier MN is tangent to the highest possible social indifference curve labelled SI.

Criticisms

Some, such as economists in the tradition of the Austrian School, doubt whether a cardinal utility function, or cardinal social welfare function, is of any value. The reason given is that it is difficult to aggregate the utilities of various people that have differing marginal utility of money, such as the wealthy and the poor.

Also, the economists of the Austrian School question the relevance of Pareto optimal allocation considering situations where the framework of means and ends is not perfectly known, since neoclassical theory always assumes that the ends-means framework is perfectly defined.

The value of ordinal utility functions has been questioned. Economists have proposed other means of measuring well-being as an alternative to price indices like willingness to pay using revealed or stated preference method. This includes subjective well-being functions based on individuals' ratings of their happiness or life satisfaction rather than on their preferences.

Price-based measures are seen as promoting consumerism and productivism by many. It is possible to do welfare economics without the use of prices; however, this is not always done. Value assumptions explicit in the social welfare function used and implicit in the efficiency criterion chosen tend to make welfare economics a normative and perhaps subjective field. This can make it controversial. However, perhaps most significant of all are concerns about the limits of a utilitarian approach to welfare economics. According to this line of argument, utility is not the only thing that matters and so a comprehensive approach to welfare economics should include other factors.

The capability approach is a theoretical framework that entails two core normative claims: first, the claim that the freedom to achieve well-being is of primary moral importance, and second, that freedom to achieve well-being is to be understood in terms of people's capabilities, that is, their real opportunities to do and be what they have reason to value.

See also

• Arrow's impossibility theorem
• Compensation principle
• Consumer surplus
• Deadweight loss
• Distribution (economics)
• Economic surplus
• Equity (economics)
• Feminist economics
• Gini coefficient
• Happiness economics
• Humanistic economics
• Income inequality metrics
• Involuntary unemployment
• Justice (economics)
• Kaldor–Hicks efficiency
• Lorenz curve
• Pareto efficiency
• Public interest
• Social safety net
• Social welfare function
• Universal basic income
• Welfare state
• World Happiness Report