Chapter 12 Inequality poverty and welfare This chapter is concerned with issues arising from the construction of ethical measures of inequality and poverty. The recent literature on measurement of inequality and poverty emphasizes the close connection between social welfare functions and ethical indices of inequality and poverty. This chapter surveys the main issues in this literature. In particular we discuss how indices of inequality can be constructed from social welfare functions and vice versa. Other issues include the equivalence theorems which provide the analytical foundations of the approach which declares one distribution to be more equal than another only when all “sensible” measures agree on the ranking. The chapter also discusses the measurement of mobility. Finally the chapter describes some of the parallel issues which arise in the measurement of poverty.