Welfare economics is a field of economic study focused on the well-being of society. It is concerned with the distributional effects of economic policies on society, and the way these policies contribute to the overall welfare of society. In particular, welfare economics seeks to identify and correct for any disparities between individuals and groups due to the structure of markets, the allocation of resources and the nature of externalities caused by market forces. By doing so, welfare economists aim to improve the overall welfare of society in the realm of economic policy.

Welfare economists attempt to identify any impediments to the fair distribution of resources throughout society, as well as tackle the negative externalities which can impede the equitable and efficient functioning of markets. Welfare economics also attempts to determine the efficiency and effectiveness of public policies, with the assistance of sophisticated tools and methods such as cost benefit analysis and social welfare functions.

Welfare economics has traditionally been based on the utilitarian approach, which suggests that the total welfare of society can be maximised when policies are chosen to maximise the sum of individual welfare in society. However, more contemporary forms of welfare economics often appeal to various other conceptions of welfare as well, such as Rawlsian and Capability approaches which place special emphasis on equity considerations in addition to utility maximisation.

Utilitarian analysis, with its emphasis on cost-benefit calculations and behavioural economics, is still a cornerstone of welfare economics in practical terms. This is not surprising, since fiscal and monetary policies, trade policy, and population dynamics all have a direct impact on human welfare and must be studied in order to improve the allocation of resources and to identify and tackle any potential obstacles to social welfare. In addition, welfare economics also assists in the design of more specific public policies, such as those related to health, education and the environment.

Welfare economics has often faced criticism for its heavy dependence on values and assumptions, as well as its reliance on quantitative processes. The goal of measuring human welfare is particularly problematic, due to the fact that human wellbeing is not easily measurable or comparable across individuals or groups. Similarly, externalities, or the spillover effects of economic activities among certain individuals or groups, often defy the traditional cost-benefit analysis approaches.

Despite the criticism, welfare economics remains an important field of economic study, one with implications for both economic theory and public policy. As society and markets become more diverse and interconnected, it is increasingly essential to gain a better understanding of the true distributional effects of economic policy and its impact on human well-being. Welfare economics provides us with a useful way to conceptualise and analyse these effects, and has implications for both government and the private sector. As we face increasing economic pressures and ethical considerations, it is critical to have a thorough understanding of the contribution of welfare economics to the overall welfare of society.