A Review Article: The Case against the Use of the Sum of Compensating Variations in Cost-Benefit Analysis.
This paper presents a case against the use of the sum of compensating variations as a cost-benefit test. The authors argue that (1) the ethical judgments implied by the test are not defensible; (2) positive sums of compensating variations occur without potential Pareto improvements, resulting in social preference reversals without simultaneous Scitovsky reversals; (3) when lump-sum transfers are feasible, a positive sum of compensating variations is necessary, but not sufficient, for a potential Pareto improvement; and (4) in order to eliminate preference reversals and intransitivities, all households must have almost identical quasi-homothetic preferences--a condition that is not satisfied in real economies.
Year of publication: |
1990
|
---|---|
Authors: | Blackorby, Charles ; Donaldson, David |
Published in: |
Canadian Journal of Economics. - Canadian Economics Association - CEA. - Vol. 23.1990, 3, p. 471-94
|
Publisher: |
Canadian Economics Association - CEA |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Population ethics and the value of life
Blackorby, Charles, (2005)
-
Quasi-orderings and population ethics
Blackorby, Charles, (1994)
-
Variable-population bargaining problems : single-series and single-parameter Gini solutions
Blackorby, Charles, (1994)
- More ...