Question

How would you define the concept of welfare? It well-being is about happiness and satisfaction with life, how would you, as an economist, go about trying to define and quantify happiness and satisfaction with life ? It is possible to do so?

Answer 1

Welfare in economics is an important concept that is based on distributiion of income, allocation of resources such that there exists equality among the people of the economy.

Usually the growth of the economy is measured by the Gross domestic product ie how much goods and services are produced within the economy. But this method fails to take into account the welfare, satisfaction of the economy ie whether there is equality of income or whether the health facilities are accessible to all etc.

So there have been many new indexes which focus on aspects other than goods and services like HDI ie Human development Index, Happiness Index etc. These indexes help quantify the qualitative factors.

Happiness index measures factors like corruption, social support, life expectancy, generosity etc. If there is less corruption, people would be more satisfied. Similarly if there are better retirement plans or the economy is literate and people are able to make their own choices, all these would increase the utility of people and hence their happiness. Hence these measures are essential to measure the welfare of the economy.