Empirical Approaches to the Measurement of Welfare

It has now been over twenty-five years since Arnold Harberger (1971) published his open letter to the profession, in which he proposed a set of guidelines for applied welfare economics. Since then, there has been great progress in the implementation of measures of welfare that are ordinally equivalent to household utility. While welfare measurement at the micro level is of independent interest, of greater practical concern is the issue of the well-being of groups of households. In the second half of the survey, I examine the issue of the aggregation of welfare across households and describe a framework that provides a consistent ranking of social outcomes.