Abstract:

Wealth or poverty assessments are very important part of the economic theory. The paper describes basic known approaches and points out its advantages and drawbacks. The Utilitarism presents social welfare function, the Neoclassical Economy developed cardinalistic criterions and the New Welfare Economics suggested ordinalistic analysis. Unfortunately all the approaches are connected with some issues. Using GDP as a measure of welfare has a reason - if the economy is growing, so must welfare. Unfortunately, the GDP as a measure of social welfare can be considered problematic because the GDP calculates impacts of economic activities whether they are positive or negative. This and another criticism led to supplement theory developing some other indicators, e.g. the human development index. However, even the HDI has its limitations of use. On the other hand, the construction of the HDI enables decomposition of the index and adding some other components to enable taking into account some other phenomenon. Criticism of the HDI considers that the HDI do not pay much attention to development from a global perspective and focuses on national ranking. Among others, the HDI also fails to include any freedom or environmental considerations. Therefore is in the article presented a modification of the HDI index by taking into account economic freedom and environmental issues. It is analyzed impact of this modification with respect to keeping logical relation between welfare and poverty. The empirical analysis showed that considering economic freedom and environmental issues as part of social welfare leads to consideration social welfare to be worse.