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Aggregation of Utility and Equivalence Scales: A Solution to the Pangloss Critique


  • Jo Thori Lind


Definitions of equivalence scales are usually based on a household utility function. This may be founded on an assumption of the household maximizing a welfare function of individual utilities. Basing inter-household comparisons of welfare on this approach is fallacious because households put different weight on the utility of the various household members, a weighting that does not necessarily correspond to an ethically sound aggregation of utility. This is called the Pangloss critique. To solve the problem, I suggest keeping the model of household behavior, but to introduce a new function to aggregate the household members' utilities. Equivalence scales based on this approach are shown to have desirable properties. Copyright 2003 Blackwell Publishing Ltd..

Suggested Citation

  • Jo Thori Lind, 2003. "Aggregation of Utility and Equivalence Scales: A Solution to the Pangloss Critique," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(4), pages 555-568, December.
  • Handle: RePEc:bla:revinw:v:49:y:2003:i:4:p:555-568

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