Rahul Sharma

Scitovsky paradox

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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.

References

Scitovsky paradox Wikipedia


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