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The Scitovsky paradox is a theory which states that in welfare economics there is no increase in social welfare by a return to the original part of the losers. It is named after the Hungarian born American economist, Tibor Scitovsky.
What he demonstrated was that if an allocation A is deemed superior to another allocation B by the Kaldor compensation criteria, by a subsequent set of moves by the same criteria, we can prove that B is also superior to A.
The paradox occurs when the gainer from the change of allocation A to allocation B can compensate the loser for making the change, but the loser could also then compensate the gainer for going back to the original position.
- Scitovsky, The Joyless Economy: An Inquiry into Human Satisfaction and Consumer Dissatisfaction (Oxford, 1976) ISBN 0-19-507347-9.
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