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On the difficulty of combining actual and potential criteria for an increase in social welfare

Author

Listed:
  • Nicolas Gravel

    (THEMA, UniversitÊ de Cergy-Pontoise, 33 Boul. du Port, 95 011 Cergy-Pontoise, Cedex, FRANCE)

Abstract

This paper examines two problems associated with the use of potential Pareto criteria in welfare economics. The first problem is the well-known intransitivity of the compensation criteria Á la Kaldor-Hicks-Scitovsky. The second problem is the possible incompatibility between the Chipman-Moore-Samuelson criterion and the Pareto principle. The main result of this paper is that, in order to avoid either of these problems, it is necessary and sufficient that the domain to which these criteria are used is such that the Chipman-Moore-Samuelson criterion encompasses completely the Pareto criterion. When interpreted in a standard economic environment, this result is shown to be equivalent to Gorman's requirement of non-crossing between utility possibility frontiers.

Suggested Citation

  • Nicolas Gravel, 2001. "On the difficulty of combining actual and potential criteria for an increase in social welfare," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 17(1), pages 163-180.
    • Handle: RePEc:spr:joecth:v:17:y:2001:i:1:p:163-180
    Note: Received: June 18, 1998; revised version: March 2, 2000
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    Cited by:

    1. Marc Fleurbaey & Philippe Mongin, 2005. "The news of the death of welfare economics is greatly exaggerated," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 25(2), pages 381-418, December.
    2. Egbert Dierker & Hildegard Dierker & Birgit Grodal, 2006. "Are Incomplete Markets Able to Achieve Minimal Efficiency?," Studies in Economic Theory, in: Christian Schultz & Karl Vind (ed.), Institutions, Equilibria and Efficiency, chapter 7, pages 117-129, Springer.

    More about this item

    Keywords

    Pareto principle; Potential Pareto criteria; Binary relations; Transitivity; Utility possibility frontiers.;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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