The Welfare Economics

Roberto Lampa ()
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Roberto Lampa: University of Macerata

Chapter Chapter 8 in Oskar Lange, 2025, pp 181-208 from Palgrave Macmillan

Abstract: Abstract This chapter explores Oskar Lange’s contributions to welfare economics, placing them within the wider context of debates on value theory and social welfare. Lange’s intervention begins as a critique of the Hicks-Allen argument (1934), which suggested that economic theory should abandon welfare analysis in favour of formal, behaviourist models. In “The Determinateness of the Utility Function” (1934), Lange challenges Pareto’s ordinal utility framework, showing that its implicit reliance on cardinal utility comparisons is essential for meaningful welfare analysis. He argues that while formal equilibrium theory can do without psychological introspection, welfare economics cannot—thereby preserving a role for marginal utility and income distribution. By 1942, in “The Foundations of Welfare Economics”, Lange responds to the ‘compensation theorists’ (Hicks, Kaldor, Robbins), who aimed to separate efficiency from distributive justice. Rejecting this division, Lange proposes a vector-based social welfare model that avoids interpersonal utility comparisons while still considering distributional aspects. His solution implements welfare maximisation through institutional mechanisms (such as legislative bodies or socialist planning agencies), effectively reconciling theoretical rigour with social relevance. Ultimately, Lange’s dual approach—combining axiomatic precision with institutional realism—underscores his broader goal: defending the capacity of economic theory to address inequality and advocate for socialist transformation.

Date: 2025
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DOI: 10.1007/978-3-031-90835-4_8

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