how is economic welfare determined 
under the lens of pareto efficiency optimal welfare or utility is achieved when the market is allowed to reach an equilibrium price for a given good or service it s at this point that consumer and producer surpluses are maximized 1however the aim of most modern welfare economists is to apply notions of justice rights and equality to the machinations of the market in that sense markets that are efficient do not necessarily achieve the greatest social good one reason for that disconnect the relative utility of different individuals and producers when assessing an optimal outcome welfare economists could theoretically argue for example in favor of a higher minimum wage even if doing so reduces producer surplus if they believe the economic loss to employers would be felt less acutely than the increased utility experienced by low wage workers practitioners of normative economics which is based on value judgments may also try to measure the desirability of public goods that consumers don t pay for on the open market the desirability of improvements to air quality brought about by government regulations is an example of what practitioners of normative economics might measure measuring the social utility of various outcomes is an inherently imprecise undertaking which has long been a criticism of welfare economics however economists have a number of tools at their disposal to gauge individuals preferences for certain public goods they may conduct surveys for example asking how much consumers would be willing to spend on a new highway project and as the economist per olov johansson points out researchers could estimate the value of say a public park by analyzing the costs people are willing to incur in order to visit it 2another example of applied welfare economics is the use of cost benefit analyses to determine the social impact of specific projects 3 in the case of a city planning commission that s trying to evaluate the creation of a new sports arena the commissioners would likely balance the benefits to fans and team owners with that of businesses or homeowners displaced by new infrastructure criticism of welfare economicsin order for economists to arrive at a set of policies or economic conditions that maximize social utility they have to engage in interpersonal utility comparisons to draw on a previous example one would have to deduce that minimum wage laws would help low skill workers more than they would hurt employers and potentially certain workers who might lose their jobs detractors of welfare economics contend that making such comparisons in any accurate way is an impractical goal it s possible to understand the relative impact on the utility of for example changes in prices for the individual but beginning in the 1930s british economist lionel robbins argued that comparing the value that different consumers place on a set of goods is less practical robbins also disparaged the lack of objective units of measurements to compare utility among different market participants 4perhaps the most potent attack on welfare economics came from kenneth arrow who in the early 1950s introduced the impossibility theorem which suggests that deducing social preferences by aggregating individual rankings is inherently flawed rarely are all the conditions present that would enable one to arrive at a true social ordering of available outcomes if for instance you have three people and they re asked to rank different possible outcomes x y and z you might get these three orderings you might conclude that the group prefers x over y because two people ranked the former over the latter along the same lines one can conclude that the group prefers y to z since two of the participants put them in that order but if we therefore expect x to be ranked above z we would be wrong in fact the majority of subjects put z ahead of x therefore the social ordering that was sought is not attained we re simply stuck in a cycle of preferences such attacks dealt a serious blow to welfare economics which has waned in popularity since its heyday in the mid 20th century however it continues to draw adherents who believe despite these difficulties that economics is in the words of john maynard keynes a moral science 