In this paper we propose an analytical foundation for normative economic theories of welfare state policies. First, we argue that the so-called “neo-liberalistic” reorganization of welfare states may be justified by the conventional, welfaristic welfare economics. Secondly, criticizing the welfaristic evaluation of social and economic policies, we propose a more comprehensive framework for social evaluations of polices, which can respect both welfaristic values and non-welfaristic values. Such a framework is formalized as an extended social welfare function (ESWF), which assigns to each economy an ordering on the pairs of resource allocations and allocation mechanisms. Thirdly, we propose three basic values, labor sovereignty, non-welfaristic distributive justice, and the Pareto principle, all of which ESWFs should satisfy. Then, we discuss under what conditions there exists a reasonable ESWF which respects these three values.
