‘Efficiency’, when used in a theoretical economic sense, refers primarily to a state of affairs in which it is impossible to make someone better off (in terms of preference satisfaction) without making someone else worse off, not saving time or materials in production or distribution. This chapter analyzes welfare economics (the focus on welfare, the identification of welfare with the satisfaction of preferences, and the rejection of interpersonal welfare comparisons) among a variety of topics. These topics include interpersonal comparisons of well-being, how welfare economics narrows normative questions, and cost benefit analyses.
