Difficulty in Modeling Social Welfare

Takayama started discussion on this issue from the optimizing behavior of producers in a price-taking, thus competitive economy, and in his opinion, the problem of social prosperity (optimality) only arises when the behavior of consumers is 'introduced', and the critical concern is that their optimizing behavior cannot be measured as explicitly as in the case of profits for the optimizing producers. Following his logic, if it were not for this difficulty, social welfare would have been evaluated by just adding up individuals' utilities, and optimized given resource constraints, so basically just an ordinary optimization problem, as an enlarged version of the production problem. Then in his opinion, since such a 'cardinal' evaluation is not possible, people resorted to relative measures, i.e. the 'ordinal', and evaluated not the optimal amount (the exact utility, which is considered unmeasurable), but the optimal behavior when the relative orders of the optimal amount is stabilized at an equilibrium state.

In this sense, the trick of analyzing a resource constrained exchange behavior becomes switching the focus between absolute (for producers) and relative (for consumers) values.