When micro-economists refer to "social welfare" as measure of an outcome of a competitive equilibrium economic model, or "welfare economics" in general, is this taken to include a measure of the supply side's "welfare" too? Every description of this term / concept that I've found leaves room for doubt.

I mean Production side is part of a society and part of the economic models of societies. They have an objective and a payoff for participating in the economy. So why shouldn't their welfare be included?

  • $\begingroup$ "Every description of this term / concept that I've found leaves room for doubt." Dig a little deeper, perhaps using the word surplus. $\endgroup$ – Giskard Feb 3 '18 at 6:56
  • $\begingroup$ @denesp I know that surplus includes the concept of producer and consumer surplus. I know that a result of partial competitive equilibrium (under certain conditions) maximizes aggregate consumer and producer surplus. And that surplus is a measure of ~payoff for both consumer and producer, similar to welfare. In my mind I've been thinking of aggregate "surplus" (consumer AND producer), and aggregate "social welfare" as roughly equivalent. But then ... I had reason for doubt, and as far as I've seen the connection isn't made, at least not clearly. $\endgroup$ – semisecure Feb 3 '18 at 7:33
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    $\begingroup$ Oh, I think I have my answer: In an exchange economy, there is only consumers, so it makes sense to only talk about welfare of consumers. In a production economy all firms are actually owned by consumers. All of the profit gets feed back to consumers who use the profit to maximize their utility. There are no real "production" entities who's goal in life is to maximize profit. Not in the classical Walrasian model anyway. $\endgroup$ – semisecure Feb 3 '18 at 10:46
  • $\begingroup$ Your question does not contain the word "exchange economy" but I am glad you got your answer. Please try to post clearer questions in the future. $\endgroup$ – Giskard Feb 3 '18 at 11:03
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    $\begingroup$ What I'm saying is it doesn't matter whether it's an exchange economy or a production economy, because when it all boils down the only agents that exist in both models (at least the classical Walrasian one's I'm reading about) are consumers. There is no "production" side, only "firms" owned and operated by consumers. $\endgroup$ – semisecure Feb 3 '18 at 11:07

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