Category: Welfare

Scitovsky Paradox

Scitovsky Reversals and the Double Criteria Granted that the strong Kaldor criteria is lacking in its ability to compare allocations, problems also arise with the weak Kaldor criteria for comparisons of welfare under different types of change. The famous Scitovsky reversal paradox, first identified by Tibor Scitovsky, uncovered an important drawback of the weak Kaldor criterion. Suppose we …

Arrow’s Impossibility Theorem

Arrow’s Impossibility Theorem In an attempt to construct a consistent social ranking of a set of alternatives on the basis of individual preferences over this set, Arrow obtained: 1) an impossibility theorem; 2) a generalisation of the framework of welfare economics, covering all collective decisions from political democracy and committee decisions to market allocation; and 3) …

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