Applied Welfare Economics

An applied economic analysis of a potential policy change will typically incorporate both positive and normative elements. The positive aspects of such an analysis involve an assessment of the likely impacts of the proposed policy change. The normative aspects of the analysis involve an assessment of the desirability of those impacts. Since a potential policy change might make some individuals better off and other individuals worse off, any assessment of the desirability of such a policy change will require both the measurement of the changes in the welfare of individuals in society that might result from the proposed policy change, and the aggregation of those impacts into some measure of the resulting change in social welfare. This course will consider various approaches to the measurement of changes in individual welfare and the aggregation of those changes into a measure of the change in social welfare. These techniques will then be applied to a number of important topics in applied economics. Such topics might include one or more of shadow pricing, taxation, public utility pricing, cost-effectiveness analysis, and cost-benefit analysis.