Research Articles

Economic Theory

, Volume 17, Issue 1, pp 163-180

First online:

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

  • Nicolas GravelAffiliated withTHEMA, Université de Cergy-Pontoise, 33 Boul. du Port, 95 011 Cergy-Pontoise, Cedex, FRANCE (e-mail: gravel@u-cergy)

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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 à 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.

Keywords and Phrases: Pareto principle, Potential Pareto criteria, Binary relations, Transitivity, Utility possibility frontiers.
JEL Classification Numbers:D60, D61.