chapter  XVI
23 Pages

The Application of the Principles of Control to a Particular Social Welfare Function: An Illustrative Case

The purpose of this chapter is to consider what might be the forms of the social welfare function (i.e. of Uq and UTq) if one was to try to formulate it and, more realistically, how far the sort of deliberations and actions of actual governments in the choice of policies could in reality be interpreted and even perhaps assisted by working out some of the implications of any such social welfare function. This chapter is thus concerned only with the 'normative' side of planning; and it neglects the whole of the 'positive' side of the problem, namely all the questions connected with the estimation of the actual effect which any given time pattern of the governmental controls will actually have on the course of the economy-i.e. on the total national income, on its distribution between rich and poor, on the level of employment, on the output and consumption of various particular goods and services, and so on, as the economy moves along any one environmental path. It is simply assumed that by means of clever work in its statistical, economic and planning offices, through the construction of an econometric model, the authorities make the best possible estimates of the effect which any given time pattern of their controls along each given environmental time-path will have upon the relevant variables in the economy.