THE ROLE OF VILFREDO PARETO IN THE DEVELOPMENT OF THE THEORY OF SOCIAL WELFARE

Abstract

The article is devoted to the contribution of the prominent Italian economist Vilfredo Pareto to the theory of public welfare. The main theoretical achievements of the economist regarding the definition and measurement of public welfare are highlighted. Vilfredo Pareto rejected the principle of quantitative utility and developed his own concept of welfare maximization through the theory of such an optimal distribution of resources, including goods, in which any redistribution of them will not lead to an increase in the utility of an individual without a decrease in utility for other individuals. Giving decisive importance to the effective distribution of resources as opposed to their endless maximization, V. Pareto noted for the first time in the many years of development of economic thought that the sources of social well-being cannot be considered solely enrichment with material goods, since the possibility of their effective redistribution on the basis of humanity and high moral and ethical values. That is, for the first time in the theory of well-being, the level of human development of society, its moral values, and the weight of ethical and humanistic principles become important. These approaches make it possible to determine a relative criterion for the efficiency (optimality) of the functioning of the economic system, which specifies the state of optimality according to the following principle: it is the achievement of such a state when no one can improve their situation without getting worse. The importance of determining the optimum from the point of view of production is indicated. At the same time, we are talking about the structure of production with a certain amount of resources and technical support, which, according to his approach, becomes optimal when it is impossible to increase the production of one product without simultaneously reducing production. Such an optimal situation occurs when the marginal productivity of production factors is the same in all variants of their application. An analysis was made of provisions where the growth of social welfare does not concern the volume of production or resources, but the consumption of materials and the creation of aggregate social demand. Since, according to the terminology, gross output and gross income of the country are one and the same (the estimate of production volumes is equal to the sum of payments to the owners of input resources), the "Pareto Optimum" is the maximum production (or income) of the economy and is the most effective operational indicator. From the perspective of political decision-making, the idea of the "Pareto optimum" leads to the following Pareto criterion for the formulation of political goals: a change in social policy is justified if, as a result of such a change, all members of society will be better off, or if the improvement will affect some of its members and the condition of all others will not deteriorate. This distribution of goods in an economy is otherwise efficient when they cannot be redistributed to improve the position of one member of society without simultaneously worsening the position of another member of society. Based on this, the quality of life should become a consolidating idea in Ukraine, which will enable the nation to build its own path of development, in which ensuring the conditions for the successful realization of the individual will become the main way for evaluating the effectiveness of economic reforms