Normative Models:

For a Mixed Economy there is the need for analyzing Governmental intervention in the context of maximization of the Social Welfare assuming a Welfare State. However Social Welfare and Social Justice both do not necessarily coincide i.e. maximization of social welfare may not imply social justice. Therefore there is relevance of studying Equity and Justice in addition to Social Welfare.

It is obvious that maximal social welfare does not necessarily imply social justice. In this context the role of the state is redefined through a number of normative theories given by Buchanan, Kolm, Rawls and Nozick. Analysis of the concept of 'equity' is made from the point of view of justice and fairness explaining the concept of Horizontal and Vertical equity.