Value judgment:

Value judgments  refer  to the  conceptions or  ethical beliefs of people  about what  is good or bad  or simply what is desirable or not  from the point of view of  the well  being  of  the society. These conceptions or  perceptions of  the people  in  society are based  on  ethical, political,  philosophical and  religious beliefs  of  the people  and  are not  based  on  any  scientific logic or law.  In  a broader sense,  'any statement which implies a recommendation of any kind is a value judgment'. This definition covers  all  ethical judgments  as well  as statements, which might  appear to  be  merely descriptive,  but  are  in  certain contexts recommendatory, persuasive or  influential. Some examples of value judgments are:  'a country grows faster if profits are taxed lightly'; 'honesty  is the best policy';  'monopolies need to be controlled';  and  'an  essential aim of public policy anywhere is a reduction in the inequalities of incomes'.  In  fact, economist I.M.D. Little has argued that any persuasive statement needs to be regarded as a value judgment.

Value judgments  are  basic  to welfare economics for  a  number  of  reasons. First,  in  welfare economics some propositions  are  formulated about  the welfare of individuals comprising a group; since welfare  is  an ethical term, any theorem incorporating the word welfare  is also ethical and must rest on some obvious or hidden value judgments. Second, value judgments are basic to welfare economics also because  it  has always been  considered to be  that part of economics where prescriptions for policy are studied. No prescriptions can ever be made without starting explicitly or  implicitly with some notion of what  is desirable, good or  suitable or  simply the social objective. Again, no objectives can be  formulated, or questions of desirability or suitability settled, without implicitly or explicitly assuming some value  judgments.

However, there  is no general agreement among economists over  the  role of value judgments  in  welfare economics. Lionel Robbins  critised the  idea  of value  judgments  as  out of  place  scientific-objective-analysis. According to him  these must be  dealt with  descriptively  by  accepting the values  of the community as observational data.

In the face of such criticisms Kaldor, Hicks  and others sought to  isolate a value free, purely objective kernel of welfare economics, which later came to be known as 'New Welfare Economics'. The chief outcome of their efforts is known as  the 'Compensation Principle'. However, it was later pointed out that the procedures of  the  new welfare economics did  not  dispense with  ethical assumptions such as consumer sovereignty and  indifference of  resources  in different uses. It was Abram Bergson, by his introduction of the concept of the Economic Welfare  Function, who  solved these problems  and  achieved  a notable isolation  and  clarification  of  the  function  of  value  judgments  in welfare economics. The economic welfare function was  ideally  suited to the formalisation of any set of value assumptions within a welfare analysis, and to the compact tracing out of their implications. He explicitly introduced a set of value judgments  in  the  economic welfare function  so that,  economists can judge  the desirability of certain economic reorganisations or policy changes. These value judgments  are determined by  their compatibility with the values prevailing in the community  the welfare of which is being studied.