Social planner

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In welfare economics, a social planner is a decision-maker who attempts to achieve the best result for all parties involved. In neo-classical welfare economics, this means the maximization of a social welfare function. In modern welfare economics, there is a greater emphasis on Pareto optimality, in which no one's economic status can be improved without worsening someone else's. Pareto-optimal solutions are not unique, and according to the Second Fundamental Theorem of Welfare Economics, a social planner can achieve any Pareto-optimal outcome by an appropriate redistribution of wealth by means of competitive market.

In practice, the social planner role is generally played by a government entity. However, real governments have multiple goals in addition to, or instead of the benefit of their people. This problem is studied in public choice economics.

Social planning problem and welfare theorem[]

^[1] The close connection exists between the social planning problem and the competitive equilibrium. The first welfare theorem tells that if an allocation and a set of prices constitute a competitive equilibrium, then the allocation will be Pareto efficient. This also tells that the competitive equilibrium is efficient; the only option is to redistribute endowments in order to achieve a different point on the contract curve, but there is nothing more to do. The second welfare theorem, tells that any social planning problem can be decentralized as a competitive equilibrium.

The welfare theorems establish a connection between the competitive equilibrium and the social planning problem. The welfare theorems also have practical implications.

Benevolent social planner[]

^[2] Instead of looking at a decentralized exchange process, let the economy assume the existence of a benevolent social planner who makes all the decisions in the economy. The social planner is benevolent because he only cares about the welfare of the consumer. Therefore, instead of having prices to guide the economy to equilibrium, it is allowed the social planner to decide how the consumer's time will be allocated between leisure and labor. The only constraints the planner faces are the consumer's time endowment and the state of technology. Obviously, the social planning problem gives the highest possible utility level for the consumer. It is assumed, in particular, that information is costless and readily available to the social planner.

The benevolent social planner solves:

max u(c,R) s.t. c = f(l)

l + R = T

The absence of the planning problem is observed. The planning problem is an assignment or allocation problem that arises because the consumer faces a tradeoff in the way he allocates his time. It is important to notice that  time, in the form of leisure gives direct utility, but that consumption of leisure leaves less time for labor and, therefore, reduces the agent's consumption opportunities. In other words, the opportunity cost of leisure is foregone consumption. The planner looks for the best way to allocate the consumer's time endowment by balancing labor and leisure. Best means that the planner maximizes the consumer's utility function. In this problem, best is unambiguous. However, when there are more that two agents the planner's allocation will depend on what the welfare function that is used.

^[3] The benevolent social planner is an all-knowing, all-powerful, well-intentioned dictator. The planner wants to maximize the economic well-being of everyone in society. This puts the question about whether he/she will just leave buyers and sellers at the equilibrium that they reach naturally on their own or can increase economic well-being by altering the market outcome in some way.

To answer this question, the planner must first decide how to measure the economic well-being of a society. One possible measure is the sum of consumer and producer surplus, which is called total surplus. Consumer surplus is the benefit that buyers receive from participating in a market, and producer surplus is the benefit that sellers receive. It is therefore natural to use total surplus as a measure of society's economic well-being.

Social planner example as a real job[]

^[4] This is professional planning work in the areas of social services planning and/or city-wide recreation planning in a multidisciplinary team environment. Employees of this class are responsible for providing community based agencies with social consultative and monitoring services as it relates to the development and administration of preventive social services programs or low income and social housing, and/or conducting socioeconomic evaluations, planning and developing innovative strategies for city-wide social and.

Working as social planner has an emphasis on the development of social policy documents and the management of preventive social service funding programs based on the results of community needs assessments and evaluation studies. Work involves collaboration and partnership with diverse community groups. Employees work with considerable independence and initiative in the funding, consultation and implementation of service initiatives consistent with municipal priorities and/or provincial requirements.

Work involves the effective long-range planning and co-ordination of programs and projects to meet the social needs and aspirations of community services provided throughout the city. Incumbents may be required to act as a Project/Team Leader or Contract Manager and provide advice and direction to consultants or other professional staff. Work can be performed under strategic guidance; results can be evaluated through consultation with a superior for conformance with municipal policy and procedures, and through the implementation of reports and recommendations.

See also[]

• Social planning
• Benevolent dictatorship

Further reading[]

• Mankiw, N. Gregory (1998). Principles of Microeconomics. Elsevier. pp. 144–145. ISBN 0-03-024502-8.

References[]