Social Choice and Welfare

, Volume 1, Issue 4, pp 251–262 | Cite as

Consumers' surpluses and consistent cost-benefit tests

  • C. Blackorby
  • D. Donaldson
Article

Abstract

In this paper we show that even if consumers' surpluses are known precisely, there are severe difficulties in using them to make consistent social-welfare judgements. In order for the Hicksian surpluses to be used, consumers must face the same prices and preferences must have affine parallel Engel curves. The cost-benefit rule must be the (possibly weighted) sum of the surpluses. We also analyze the Marshallian measure.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Blackorby, C, Donaldson D (1980) A theoretical treatment of Indices of absolute inequality. Int Econ Rev 21:107–136Google Scholar
  2. Blackorby C, Primont D, Russell RR (1978) Duality, separability, and functional structure: theory and economic applications. North Holland, New York AmsterdamGoogle Scholar
  3. Boadway R (1974) The welfare foundations of cost-benefit analysis. Econ J 84:926–939Google Scholar
  4. Boadway R (1976) The welfare foundations of cost-benefit analysis — a reply. Econ J 86:359–361Google Scholar
  5. Bruce N, Harris R (1982) Cost-benefit criteria and the compensation principle in evaluating small projects. J Polit Econ 90:755–776Google Scholar
  6. Chipman JS, Moore JC (1976) The scope of consumer's surplus arguments. In: Tang M, Westfield F, Worley J (eds) Evolution, welfare, and time in economics: Essays in Honor of Nicholas Georgescu-Roegen. Heath, Lexington pp 69–123Google Scholar
  7. Chipman JS, Moore JC (1979) Consumers' surplus as a measure of aggregate welfare. University of MinnesotaGoogle Scholar
  8. Dixit AK, Weller PA (1979) The three consumer's surpluses. Economica 46:125–135Google Scholar
  9. Eichhorn W (1978) Functional equations in economics. Addison-Wesley, ReadingGoogle Scholar
  10. Foster E (1976) The welfare foundations of cost-benefit analysis — a comment. Econ J 86:353–358Google Scholar
  11. Gorman WM (1953) Community preference fields. Econometrica 21: 63–80Google Scholar
  12. Gorman WM (1955) The intransitivity of certain criteria used in welfare economics. Oxford Econ Papers (NS) 7:25–35Google Scholar
  13. Hicks JR (1939) Value and capital. Oxford University Press, LondonGoogle Scholar
  14. Pauwels W (1978) The possible perverse behavior of the compensating variation as a welfare ranking. Z Nationalökonomie 38:369–378Google Scholar
  15. Roberts K (1980) Price-independent welfare prescriptions. J Publ Econ 13:277–297Google Scholar
  16. Seade J (1978) Consumer's surplus and linearity of Engel curves. Econ J 88:511–523Google Scholar
  17. Silberberg E (1972) Duality and the many consumers' surpluses. Am Econ Rev 62:942–956Google Scholar
  18. Vartia YO (1983) Efficient methods of measuring welfare change and compensated income in terms of ordinary demand functions. Econometrica 51:79–98Google Scholar

Copyright information

© Springer-Verlag 1985

Authors and Affiliations

  • C. Blackorby
    • 1
  • D. Donaldson
    • 1
  1. 1.Department of EconomicsThe University of British ColumbiaVancouverCanada

Personalised recommendations