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Why equity cannot be separated from efficiency: the welfare economics of progressive social pricing

Author

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  • Ron Baiman

    (Roosevelt University, Department of Economics, 430 Michigan Avenue, Chicago, IL 60605-1394, USA; Tel.: + 1-312-341-3794. baiman5@aol.com)

Abstract

Applied neoclassical microeconomists maintain that when profits are constrained, and average costs are higher than marginal costs, Ramsey "inverse elasticity" pricing optimizes static consumer welfare. However, when weighted, instead of unweighted, consumer surplus aggregation is used, the Ramsey pricing rule becomes a "progressive social pricing rule," which suggests that under plausible conditions "direct-elasticity" rather than "inverse-elasticity" pricing is consumer welfare optimal.

Suggested Citation

  • Ron Baiman, 2001. "Why equity cannot be separated from efficiency: the welfare economics of progressive social pricing," Review of Radical Political Economics, Union for Radical Political Economics, vol. 33(2), pages 203-221, June.
    • Handle: RePEc:sae:reorpe:v:33:y:2001:i:2:p:203-221
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    Cited by:

    1. Brown, Toby & Faruqui, Ahmad & Grausz, Léa, 2015. "Efficient tariff structures for distribution network services," Economic Analysis and Policy, Elsevier, vol. 48(C), pages 139-149.
    2. Mosácula, Celia & Chaves-Ávila, José Pablo & Reneses, Javier, 2019. "Reviewing the design of natural gas network charges considering regulatory principles as guiding criteria in the context of the increasing interrelation of energy carriers," Energy Policy, Elsevier, vol. 126(C), pages 545-557.

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