Appunti di Economic Assessment of Urban Transformations (Primo + Secondo Parziale)

1. Base elements of public economics

• WELFARE ECONOMICS
• A classical field in Public Economics (Studied in the early stages of Public E. - in the second half of the nineteenth century)
• Objective of this field: THE ANALYSIS OF THE REASONS WHY WELFARE IS SO DIFFERENT ACROSS A GIVEN UNIT (COUNTRIES, REGIONS, CITIES)
• The context when this field emerged (The end of 1900) was really owing to philosophical theories called UTILITARIANIST THEORY
• based on 3 principles:
• These principles act like a rule to the understanding of the ways in which aggregate welfare can be calculated
• Are principles that guide the evaluation of welfare
• 1. WELFARISM
• Says that we evaluate things/actions on the basis of the level

1. Basic elements of public economics

• Welfare Economics
  • A classical field in Public Economics (studied in the early stages of Pub Ec in the second half of the nineteenth century)
  • Objective of this field: The analysis of the reasons why welfare is so different across a given unit (countries/regions/cities)
  • The context when this field emerged (the end of 1900) was really owing to philosophical theories called Utilitarianism
    • Based on 3 principles:
• These principles act like a rule to the understanding of the ways in which aggregate welfare can be calculated. Are principles that guide the evaluation of welfare
  • 1. Welfarism
    • Says that we evaluate things/actions on the basis of the level

of happiness and satisfaction that people get from doing what they prefer.

2. CONSEQUENTIALIST

says that we evaluate actions on the basis of the consequences they generate

3. SUM-RANKING

says that the correct criteria to evaluate aggregate welfare is given by the sum of individual welfare levels.

But

a final fundamental criteria of this theory is the principle

of PARETO-EFFICIENCY

A resource allocation is Pareto efficient if and only if that

resource allocation cannot be modified so that the level of

welfare of everyone is improved A welfare state is Pareto optimal if and only if there is no alternative state of the world in which an individual is better off

and worse off

T

- improving the Pareto efficiency of a system you have always

at least maintain for all the people the same level of

welfare but at least for some people you have to increase

the welfare level.

- The 2 fundamental theorems of Welfare Economics are based

on the concept of Pareto -efficiency

- 1^o FUNDAMENTAL THEOREM OF WELFARE ECONOMICS

States that a competitive equilibrium is Pareto-efficient

This provides the foundation for the universal Preference

- towards private amounts to systems whose allocation

of resources takes place on the bases of prices rather then

resultarized / socialized planning.

2^ND FUNDAMENTAL THEOREM OF WELFARE ECONOMICS

States that a Pareto efficient allocation can be obtained through a competitive equilibrium through the intervention of an actor called Social Planner

The Social Planner has the role to reinstate the conditions for perfect competition.

According to both these theorems the perfect competitive market is the market institution that maximizes aggregate welfare levels.

Together they provide the main foundation for the adoption of free market and competition.

• Excludability
• Impure public goods: Example of healthcare
  • Our public healthca