This is a substantially revised version of the ?rst edition. Some of the chapters have been largely rewritten, notably the chapters on ‘happiness’, the valuation of life and the problem of equality. In addition, Chapter 1 of the ?rst edtion has been scrapped and substantial changes have been made to all the opening chapters in order to bring out more clearly the main theme of this book. This is an attempt to provide a simple method for analysing any problem in economic policy. The method is basically a distinction between what parts of the problem are questions of fact and what parts are questions of value judgement. Consequently,afteraninitialexplanationofthebasicconceptsinvolved, the rest of the book comprises a discussion of the way that this distinction crops up in the analysis of applied economic problems. This begins with a generalexplanationoftheroleoffactsandvaluejudgementsinthegeneral theory of welfare economics, and is followed by the application of this distinction to some major contemporary economic problems, such as equality or obligations to other countries or future generations.