Among the Greeks and Romans public assistance was given chiefly to those holding full citizenship. It was early connected with religion, as among the Hebrews and, from them, among the Christians and later the Muslims. The Christian Church was the main agency of social welfare in the Middle Ages, supplemented by the guilds. Later, national and local governmental agencies, as well as many private agencies, took over much of the charitable activity of the church.
First of the extensive state efforts was the Elizabethan poor law of 1601, which attempted to classify dependents and provide special treatment for each group on the local (parish) level. During the Industrial Revolution, many entrepreneurs believed that social welfare programs undertaken by the state violated the concepts of laissez faire and therefore opposed such measures. Exceptions were such men as Robert Owen, who believed that social welfare measures were essential but their implementation should be undertaken cooperatively rather than as a function of the state.
The first modern government-supported social welfare program for broad groups of people, not just the poor, was undertaken by the German government in 1883. Legislation in that year provided for health insurance for workers, while subsequent legislation introduced compulsory accident insurance and retirement pensions. In the next 50 years, spurred by socialist theory and the increasing power of organized labor, state-supported social welfare programs grew rapidly, so that by the 1930s most of the world's industrial nations had some type of social welfare program.
Not all governments have equally extensive social welfare systems. Great Britain and the Scandinavian countries, often termed "welfare states," have wide-ranging social welfare legislation. Britain's National Health Service, for example, was established (1948) to provide free medical treatment to all. Private philanthropies and charitable organizations, however, continue to operate in these countries in many areas of public welfare. International relief bodies, such as the Red Cross, and agencies of the United Nations, such as the World Health Organization (WHO) and the United Nations Children's Fund (UNICEF), provide social welfare services throughout the world, especially during times of distress and in poverty-stricken areas.
In the United States the Social Security Act of 1935 provided for federally funded financial assistance to the elderly, the blind, and dependent children. Subsequent amendments broadened the act in terms of coverage provided and eligibility; included was the provision for medical insurance to the aged (1965) under the Medicare program and to low-income families (1965) under the Medicaid program.
In the United States public assistance has increasingly come under state and federal control, although private philanthropy still plays a major role. By the early 1990s the Clinton administration approved changes in many states' welfare systems, including work requirements in exchange for benefits (so-called workfare) and time limits. In 1996 the president signed a bill enacting the most sweeping changes in social welfare policy since the New Deal. In general the bill, which sought to end long-term dependence on welfare programs, represented a reversal of previous welfare policy, shifting some of the federal government's role to the states and cutting many benefits. Among the bill's major provisions were the requirement that about a quarter of the population then on welfare be working or training for work by 1997 (a goal that was reached in most states) and that a half do so by 2002; the granting of lump sums to states to run their own welfare and work programs; an end to the federal guarantee of cash assistance for poor children; the limitation of lifetime welfare benefits to five years (with hardship exemptions for some); the requirement that the head of every welfare family work within two years of receiving benefits or lose them; and the establishment of stricter eligibility standards for the Supplemental Security Income program (which excluded many poor disabled children from benefits).
In terms of reducing the welfare rolls, the bill initially proved successful; in 1999 there were fewer welfare recipients then there had been in 30 years. Most states also reported a surplus of federal welfare funds. Those funds, which by law remained fixed for five years, provided an unforeseen benefit for the states, enabling some states to increase social welfare spending. Additional changes passed in 2005 forced states to increase the hours worked by recipients while tightening the regulations for those who are affected by the work requirements, raising concerns in a number of states with education and addiction-treatment programs for welfare recipients.
See R. E. Asher, United Nations and the Promotion of the General Welfare (1957); H. Kraus, ed., International Cooperation for Social Welfare (1960); A. C. Marts, Man's Concern for His Fellow-man (1961); S. Mencher, Poor Law to Poverty Program (1967); J. F. Handler, Reforming the Poor (1972); E. W. Martin, Comparative Development in Social Welfare (1972); W. I. Trattner, From Poor Law to Welfare State (1974).
Necessary general conditions are that at the maximum value of the function:
Bergson showed how welfare economics could describe a standard of economic efficiency despite dispensing with interpersonally-comparable cardinal utility, the hypothesizaton of which may merely conceal value judgments, and purely subjective ones at that.
| Earlier neoclassical welfare theory, heir to the classical utilitarianism of Bentham, had not infrequently treated the Law of Diminishing Marginal Utility as implying interpersonally comparable utility, a necessary condition to achieve the goal of maximizing total utility of the society. Irrespective of such comparability, income or wealth is measurable, and it was commonly inferred that redistributing income from a rich person to a poor person tends to increase total utility (however measured) in the society.* But Lionel Robbins (1935, ch. VI) argued that how or how much utilities, as mental events, would have changed relative to each other is not measurable by any empirical test. Nor are they inferable from the shapes of standard indifference curves. Hence, the advantage of being able to dispense with interpersonal comparability of utility without abstaining from welfare theory. |
Samuelson (1947, p. 221) himself stressed the flexibility of the social welfare function to characterize any one ethical belief, Pareto-bound or not, consistent with:
He also presented a lucid verbal and mathematical exposition of the social welfare function (1947, pp. 219-49) with minimal use of Lagrangean multipliers and without the difficult notation of differentials used by Bergson throughout. As Samuelson (1983, p. xxii) notes, Bergson clarified how production and consumption efficiency conditions are distinct from the interpersonal ethical values of the social welfare function.
Samuelson further sharpened that distinction by specifying the Welfare function and the Possibility function (1947, pp. 243-49). Each has as arguments the set of utility functions for everyone in the society. Each can (and commonly does) incorporate Pareto efficiency. The Possibility function also depends on technology and resource restraints. It is written in implicit form, reflecting the feasible locus of utility combinations imposed by the restraints and allowed by Pareto efficiency. At a given point on the Possibility function, if the utility of all but one person is determined, the remaining person's utility is determined. The Welfare function ranks different hypothetical sets of utility for everyone in the society from ethically lowest on up (with ties permitted), that is, it makes interpersonal comparisons of utility. Welfare maximization then consists of maximizing the Welfare function subject to the Possibility function as a constraint. The same welfare maximization conditions emerge as in Bergson's analysis.
| For a two-person society, there is a graphical depiction of such welfare maximization at the first figure of Bergson-Samuelson social welfare functions Relative to consumer theory for an individual as to two commodities consumed, there are the following parallels: |
In the above contexts, a social welfare function provides a kind of social preference based on only individual utility functions, whereas in others it includes cardinal measures of social welfare not aggregated from individual utility functions. Examples of such measures are life expectancy and per capita income for the society. The rest of this article adopts the latter definition.
The form of the social welfare function is intended to express a statement of objectives of a society. For example, take this example of a social welfare function:
where is social welfare and is the income of individual i among n in the society. In this case, maximising the social welfare function means maximising the total income of the people in the society, without regard to how incomes are distributed in society. Alternatively, consider the Max-Min utility function (based on the philosophical work of John Rawls):
Here, the social welfare of society is taken to be related to the income of the poorest person in the society, and maximising welfare would mean maximising the income of the poorest person without regard for the incomes of the others.
These two social welfare functions express very different views about how a society would need to be organised in order to maximise welfare, with the first emphasizing total incomes and the second emphasising the needs of the poorest. The max-min welfare function can be seen as reflecting an extreme form of risk aversion on the part of society as a whole, since it is concerned only with the worst conditions that a member of society could face.
Amartya Sen proposed a welfare function in 1973:
The value yielded by this function has a concrete meaning. There are several possible incomes which could be earned by a person, who randomly is selected from a population with an inequal distribution of incomes. This welfare function marks the income, which a randomly selected person is most likely to have. Similar to the median, this income will be smaller than the average per capita income.
Here the Theil-T index is applied. The inverse value yielded by this function has a concrete meaning as well. There are several possible incomes to which an Euro may belong, which is randomly picked from the sum of all inequally distributed incomes. This welfare function marks the income, which a randomly selected Euro most likely belongs to. The inverse value of that function will be larger than the average per capita income.
The article on the Theil index provides further information about how this index is used in order to compute welfare functions.