How To Avoid a Common Mistake in Welfare Economics

Abstract

This article examines the logical foundation of the procedure of maxi-mizing an arbitrary welfare function to obtain necessary conditions for Pareto optimality. In a general set theoretic context, a sufficient condition for obtaining necessary conditions for Pareto optimality by maximizing an arbitrary welfare function is derived. The article examines the device relative to the class of continuous and twice differentiable welfare functions and finds that it is more generally applicable in this case than it is relative to the class of linear welfare functions.