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Welfare Economics and Millennium Development Goals
Welfare economics analyzes how resources are allocated and how this impacts social welfare. There are two fundamental theorems: competitive markets tend toward efficient allocation, and any Pareto efficient allocation can be achieved through lump-sum redistribution. This is illustrated using an Edgeworth box model with Raj and Priya exchanging two goods. The contract curve shows all Pareto efficient points. The Millennium Development Goals aimed to eradicate poverty, achieve education for all, promote gender equality, reduce child mortality, improve maternal health, combat HIV/AIDS and malaria, ensure environmental sustainability, and develop a global partnership for development - all by 2015. Progress was measured using indicators like poverty rates, education enrollment rates, and
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Welfare Economics and Millennium Development Goals
- 1. Welfare Economics and MillenniumDevelopment Goals
- 2. Welfare economics A branchof economics that focuses on the optimal allocation of resources and goods and how this affects social welfare. It analyzes the total good or welfare that is achieved at a current state as well as how it is distributed.
- 3. Fundamental theorems There aretwo fundamental theorems of welfare economics. The first theorem is taken to the analytical confirmation of Adam smith’s “invisible hand ” hypothesis , namely competitive markets tend towards an efficient allocation of resources.
- 4. This theorem reliesonly on three assumptions 1.Complete markets 2.Price-taking behavior 3.Weak assumption of local non satiation of preferences.
- 5. Cont… The second theoremstates that out of all possible Pareto-efficient outcomes, one can achieve any particular one by enacting a lump-sum wealth redistribution and then letting the market take over.
- 6. Pure – ExchangeEconomy We start with a simple model: 2 people 2 goods, each of fixed quantity Determine good allocation
- 7. Two people: Rajand Priya Two goods: Food (f) & Video Games (V) We put Raj on the origin, with the y-axis representing food and the x axis representing video games.
- 8. Raj food’s graph VideoGames Food u O x Raj Ou is Raj’s food, and Ox is Raj’s Video Games
- 9. If weconnect a “flipped” graph of Priya’s goods, we get an EDGEWORTH BOX, where y is all the food available and x is all the video games .
- 10. Edge worth box ry o’ ’ Video Games Food u O x Raj O’w is Priya’s food, and O’y is Priya’s Video Games w s Total food in the market is Or(=O’s) and total Video Games is Os (=O’r) Each point in the Edgeworth Box represents one possible good allocation
- 11. Edge worth andUtility We can then add INDIFFERENCE curves to Raj’s graph (each curve indicating all combinations of goods with the same utility). Curves farther from O have a greater utility We can then superimpose Priya’s utility curves. Curves farther from O’ have greater utility
- 12. Raj Utility Curves VideoGames Food O Raj Raj utility is greatest at M3 M1 M2 M3
- 13. When anallocation is NOT Pareto- efficient, it is wasteful (at least one person could be made better off) Pareto efficiency evaluates the desirability of an allocation A PARETO IMPROVEMENT makes one person better off without making anyone else worth off (like the move from A to C)
- 14. Edgeworth Box andUtility Video Games Food O Raj Priya has the highest utility at S3 r O’ Priya s At point A, Raj has utility of M3 and Priya has Utility of S2 M1 M2 M3 S1 S2 S3 A
- 15. Edgeworth Box andUtility Video Games Food O Raj If consumption is at A, Raj has utility M1 while Priya has utility S3 r O’ Priya s By moving to point B and then point C, Raj utility increases while Priya remains constant M1 M2 M3 S3 A B C
- 16. Pareto Efficiency Video Games Food O Raj PointC, where the indifference curves barely touch is called PARETO EFFICIENT, as one person can’t be made better off without harming the other. r O’ Priya s M1 M2 M3 S3 C
- 17. Pareto Efficiency Video Games Food O Raj Ifwe start at point A: -C is a pareto improvement that makes Raj better off -D is a pareto improvement that makes Raj better off -E is a pareto improvement that makes both better off r O’ Priya s M1 M2 M3 S3 C S5 S4 A D E
- 18. The Contract Curve Assuming all possible starting points, we can find all possible Pareto-efficient points and join them to create a CONTRACT CURVE All along the contract curve, opposing indifferent curves are TANGENT to each other Since the slope of the indifference curve is the willingness to trade, or MARGINAL RATE OF SUBSTITUTION (x for y) (MRSxy), along this contract curve: MRS of Raj=MRS of Priya Pareto Efficiency Condition
- 19. The Contract Curve VideoGames Food O Raj r O’ Priya s
- 20. Typical Social IndifferenceCurves Priya’s Utility Raj’sUtility O Raj An indifference curve farther from the origin represents a higher level of social welfare.
- 21. If wesuperimpose social indifference curves on top of the utilities possibilities curve, we can find the Pareto efficient point that maximizes social welfare. This leads us to the SECOND FUNDAMENTAL THEOREM OF WELFARE ECONOMICS. -Welfare Economics is concerned with RESULTS, not PROCESS.
- 22. Millennium Development Goals The Millennium Development Goals (MDGs) have helped in bringing out a much needed focus and pressure on basic development issues, which in turn led the governments at national and sub national levels to do better planning and implement more intensive policies and programmes.
- 23. Eight MDG Goal1: Eradicate Extreme Poverty and Hunger Goal 2: Achieve Universal Primary Education Goal 3: Promote Gender Equality and Empower Women Goal 4: Reduce Child Mortality Goal 5: Improve Maternal Health Goal 6: Combat HIV/AIDS, Malaria and TB Goal 7: Ensure Environmental Sustainability Goal 8: Develop Global Partnership for Development
- 24. ERADICATE EXTREME POVERTYAND HUNGER 1. Poverty Head Count Ratio (percentage of population below the national poverty line) 2. Poverty Gap Ratio 3. Share of poorest quintile in national consumption
- 25. ACHIEVE UNIVERSAL PRIMARY EDUCATION Ensure that by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary education. An all-round development of our citizens can be achieved by building strong foundations in education. Education is a unique investment in the present, bearing invaluable benefits in the future.
- 26. The overallincrease in enrolment in primary education during the period 2000-01 to 2013-14 was 18.6 million while the overall increase in enrolment of boys and girls respectively was 4.6 million and 14.0 million during this period. The enrolment in primary education reached the highest level in 2011-12 (137.1 million) and then declined to 134.8 million in 2012-13 and to 132.4 million in 2013-14.
- 27. PROMOTE GENDER EQUALITY& EMPOWER WOMEN Gender equality is a human right which entitles all persons irrespective of their gender to live with dignity and with freedom. Empowered women make invaluable contribution to the improvement of health conditions and educational status and productivity of whole families and communities
- 28. REDUCE CHILD MORTALITY Children are the most valuable assets for every country. A child’s life is highly vulnerable to various diseases and substantial number of children lose their lives every day all around the world.
- 29. IMPROVE MATERNAL HEALTH Maternal mortality ratio The maternal mortality ratio is the number of women who die from any cause related to or aggravated by pregnancy or its management (excluding accidental or incidental causes) during pregnancy and childbirth or within 42 days
- 30. COMBAT HIV AIDS& MALARIA HIV prevalence among pregnant women aged 15-24 years , Condom use rate of the contraceptive prevalence rate, Prevalence and death rates associated with Malaria Proportion of population in Malaria risk areas using effective Malaria prevention and treatment measures, Prevalence and death rates associated with Tuberculosis .
- 31. ENSURE ENVIRONMENTAL SUSTAINABILITY Proportionof land area covered by forest Ratio of area protected to maintain biological diversity to surface area Energy use per unit of GDP
- 32. Develop a globalpartnership for development In co-operation with the private sector, make available the benefits of new technologies, especially information and communication.
- 33.