Scitovsky paradox

From Wikipedia, the free encyclopedia
Jump to: navigation, search

The Scitovsky paradox is a result in welfare economics which states that 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 Scitovsky demonstrated was it is possible 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.

Further reading[edit]