Scitovsky Paradox

Discipline: Economics

Named after the Hungarian-born American economist TIBOR SCITOVSKY (1910-2002), Scitovsky paradox states that in welfare economics there is no increase in social welfare by a return to the original part of the losers.

If Allocation X is changed to Allocation Y, those who suffer in the move could still gain enough by returning to X even after forgoing some of the difference between the two allocations. Thus, a medium-rate taxpayer might easily be persuaded to pay more taxes if the threat of paying much higher taxes is removed.

Also see: cost benefit analysis, pareto optimality, social welfare function

Source:
T Scitovsky, The Joyless Economy: An Inquiry into Human Satisfaction and Consumer Dissatisfaction (Oxford, 1976)

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