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Welfare-based approaches

Welfare-based approaches to measuring living standards consider that all actions and policies should be evaluated on the basis of their consequences for human welfare.[3] The philosopher Joseph Raz summed this up in his humanistic principle: "the explanation and justification of the goodness or badness of anything derives ultimately from its contribution, actual or possible, to human life and its quality" (Raz, 1986, p.194).

The most well-known and influential welfare-based approach is utilitarianism. English philosopher Jeremy Bentham provided the first systematic account of the theory of utilitarianism in the 18th century. He was influenced both by Hobbes' account of human nature and Hume's account of social utility. Bentham famously held that humans were ruled by two sovereign masters: pleasure and pain. We seek pleasure and the avoidance of pain, they "...govern us in all we do, in all we say, in all we think..." (1789, Ch 1). Bentham espoused the principle of utility as the standard of right action on the part of governments and individuals, and held that public policy should seek to provide "the greatest happiness of the greatest number" (1789, Ch 1).

Utilitarian theory was revised and expanded by Bentham's student John Stuart Mill, though he disagreed with some of Bentham's claims. For example, Mill considered intellectual and moral pleasures to be superior to physical pleasure: "it is... better to be Socrates dissatisfied than a fool satisfied" (1863, Ch 2). Both Bentham and Mill used utilitarianism to push for changes to laws and social policies. Mill, for example, argued for women's suffrage and free speech on the grounds that they would increase happiness.

There are some conceptual limitations to the utilitarian approach. Among the most significant are the following:

  • Utilitarianism concerns itself with maximising the sum of total happiness, and distributional outcomes are only important in terms of their impact on the sum. However, utilitarianism does acknowledge that in some cases there will be diminishing marginal utility, and hence a given distributional outcome may be more efficient than another.
  • Utilitarianism seeks to maximise utility, and, while other factors may have instrumental value, they hold no intrinsic importance. This assumption is questioned by many theorists. For example, human rights philosophers argue that there are some basic rights to which all humans are entitled, while libertarians argue that liberty is important in and of itself, and not just as a means to gain happiness.[4]
  • People's minds are malleable and adapt to different levels of utility, which can limit the meaningfulness of interpersonal utility comparisons. For example, people suffering severe poverty may have come to terms with their hardship out of necessity. This does not usually mean that we are no longer concerned about their circumstances (Sen, 1999).

A variation on utilitarianism - known as ideal utilitarianism - addresses the second criticism above, by arguing that good outcomes should not simply be reduced to pleasure. G.E. Moore (1903), a key proponent of this theory, considered that some things have intrinsic value, such as beauty, knowledge and virtue, and thus should be maximised for their own sake. Modern welfare economics has responded to some of these concerns by adapting social welfare functions to take into account broader values than utility, and allowing weightings to be attached to certain groups within society if particular distributional outcomes are desired.


  • [3]Welfare-based theories are a subset of consequentialist theories, which hold that the morality of one's conduct should be judged by the consequences of that conduct. This is in contrast to deontological theories which hold that the morality of conduct is determined by the nature of the behaviour itself, rather that its outcomes (Spielthenner, 2005).
  • [4]Nozick, in his most prominent work Anarchy, State and Utopia (1974), employs a thought experiment ("the experience machine") to argue that people would prefer to live a real life rather than a machine-induced experience of a wonderful life, and therefore ethical hedonism must be false. Sen also rejects the idea that utility is the only value. In his words, "we do not necessarily want to be happy slaves or delirious vassals" (1974, p.62).
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