The Pareto Criterion and the Kaldor Hicks Criterion

2021 ◽  
pp. 190-194
Author(s):  
Harald Minken
Keyword(s):  
Pareto Criterion

What’s in, what’s out? Towards a rigorous definition of the boundaries of benefit-cost analysis

2021 ◽  
pp. 1-17
Author(s):  
Daniel Acland
Keyword(s):  
Cost Analysis ◽  
Willingness To Pay ◽  
Low Cost ◽  
Consumer Sovereignty ◽  
Benefit Cost Analysis ◽  
Rigorous Definition ◽  
Pareto Criterion ◽  
Definition Of ◽  
Benefit Cost

Abstract Benefit-cost analysis (BCA) is typically defined as an implementation of the potential Pareto criterion, which requires inclusion of any impact for which individuals have willingness to pay (WTP). This definition is incompatible with the exclusion of impacts such as rights and distributional concerns, for which individuals do have WTP. I propose a new definition: BCA should include only impacts for which consumer sovereignty should govern. This is because WTP implicitly preserves consumer sovereignty, and is thus only appropriate for ‘sovereignty-warranting’ impacts. I compare the high cost of including non-sovereignty-warranting impacts to the relatively low cost of excluding sovereignty-warranting impacts.

The Pareto criterion and generational time

2020 ◽  
pp. 154-158
Author(s):  
E.J. Mishan ◽  
Euston Quah
Keyword(s):  
Pareto Criterion

THE WELFARE COST OF EXCESS VOLATILITY IN INCOMPLETE MARKETS WITH SUNSPOTS

2017 ◽  
Vol 23 (3) ◽  
pp. 1062-1073 ◽  
Author(s):  
Minwook Kang
Keyword(s):  
Incomplete Markets ◽  
Price Level ◽  
Welfare Cost ◽  
Local Analysis ◽  
Equilibrium Allocation ◽  
Excess Volatility ◽  
Pareto Criterion ◽  
Sunspot Equilibria ◽  
Level I ◽  
Different Levels

In an incomplete markets economy with sunspots, the Pareto-criterion cannot rank sunspot equilibria of different levels of excess price-level volatility. Therefore, I propose a measure of excess volatility cost in terms of a period-0 endowment good. Ex-ante endowment subsidies are provided, in theory, to each consumer, so that the resulting equilibrium allocation of the higher volatility is Pareto-equivalent to the original benchmark equilibrium with a lower volatility level. The aggregate volatility cost is computed as the sum of all consumers' subsidies. Focusing on local analysis that considers small variations around a given volatility level, I show that the aggregate cost strictly increases in volatility even though each individual cost does not necessarily have this property.

Note on Two Abuses: Drugs and the Pareto Criterion

1976 ◽  
Vol 4 (1) ◽  
pp. 88-96 ◽  
Author(s):  
J. Patrick Gunning
Keyword(s):  
Drug Abuse ◽  
Social Policy ◽  
Rational Choice ◽  
Recent Article ◽  
Control Drug ◽  
Economic Paradigm ◽  
Individual Cognition ◽  
Pareto Criterion

This paper shows, by example, how easy it is for an imaginative economist to manufacture plausible assumptions about individual cognition, even when the set of assumptions is limited to those which conform to the economic paradigm of individual rational choice. It examines a recent article which employed the Pareto criterion to discard classes of arguments in favor of using social policy to control drug abuse. It attempts to show that assumptions which seem realistic can be used to rescue each of the arguments which were discarded. The point that is made is not that social policy should be used to control drug abuse but that economists can do little in this field but provide a means for logically analyzing the problem.

scholarly journals Non-selfish behaviour: Are social preferences or social norms revealed in distribution decisions?

2020 ◽  
Author(s):  
Shaun P. Hargreaves Heap ◽  
Konstantinos Matakos ◽  
Nina Sophie Weber
Keyword(s):  
Social Norms ◽  
Social Behaviour ◽  
Alternative Explanation ◽  
Social Norm ◽  
Social Preference ◽  
Social Preferences ◽  
Social Identification ◽  
Survey Experiments ◽  
Pareto Criterion ◽  
Perceived Social Norms

People frequently behave non-selfishly in situations where they can reduce their own payoff to help others. It is typically assumed that such pro-social behaviour arises because people are motivated by a social preference. An alternative explanation is that they follow a social norm. We test with two survey experiments (N=2,408) which of these two explanations can better explain decisions people make in a simple distribution game under three different elicitation mechanisms. Unlike previous studies, we elicit preferences and perceived social norms directly for each subject. We find that i) norm-following better explains people’s distributive choices compared to social preferences and ii) lack of confidence in one’s social preference –itself explained by weaker social identification— predicts norm-following. Our findings imply that the Pareto criterion has weaker (than previously thought) foundations for welfare evaluations, but this effect may be attenuated in societies with stronger social identification. Perhaps unexpectedly, but unsurprisingly given i) above, we find that different mechanisms for eliciting social preferences have no effect on distribution decisions.

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