Scitovsky paradox
Encyclopedia
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.
Theory
The English word theory was derived from a technical term in Ancient Greek philosophy. The word theoria, , meant "a looking at, viewing, beholding", and referring to contemplation or speculation, as opposed to action...
which states that in welfare economics
Welfare economics
Welfare economics is a branch of economics that uses microeconomic techniques to evaluate economic well-being, especially relative to competitive general equilibrium within an economy as to economic efficiency and the resulting income distribution associated with it...
there is no increase in social welfare by a return to the original part of the losers. It is named after the Hungarian
Hungary
Hungary , officially the Republic of Hungary , is a landlocked country in Central Europe. It is situated in the Carpathian Basin and is bordered by Slovakia to the north, Ukraine and Romania to the east, Serbia and Croatia to the south, Slovenia to the southwest and Austria to the west. The...
born American
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
, Tibor Scitovsky
Tibor Scitovsky
Tibor de Scitovsky, also known as Tibor Scitovsky, , was a Hungarian born, American economist who was best known for his writing on the nature of people's happiness in relation to consumption...
.
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.
Literature
- Scitovsky, The Joyless Economy: An Inquiry into Human Satisfaction and Consumer Dissatisfaction (Oxford, 1976) ISBN 0195073479