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Radner’s cost–benefit analysis in the small: An equivalence result

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  • Schlee, Edward E.

Abstract

I show that local changes in five welfare measures are equal: a measure proposed by Radner (1993); consumers’ surplus; the Slutsky change in real wealth; the Divisia quantity index, and Debreu’s (1951) coefficient of resource utilization (the last two rescaled in units of a numeraire good).

Suggested Citation

  • Schlee, Edward E., 2013. "Radner’s cost–benefit analysis in the small: An equivalence result," Economics Letters, Elsevier, vol. 120(3), pages 570-572.
  • Handle: RePEc:eee:ecolet:v:120:y:2013:i:3:p:570-572
    DOI: 10.1016/j.econlet.2013.06.012
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    References listed on IDEAS

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    1. Mas-Colell,Andreu, 1990. "The Theory of General Economic Equilibrium," Cambridge Books, Cambridge University Press, number 9780521388702, May.
    2. Blackorby, Charles, 1999. " Partial-Equilibrium Welfare Analysis," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(3), pages 359-374.
    3. Debreu, Gerard, 1970. "Economies with a Finite Set of Equilibria," Econometrica, Econometric Society, vol. 38(3), pages 387-392, May.
    4. Debreu, Gerard, 1972. "Smooth Preferences," Econometrica, Econometric Society, vol. 40(4), pages 603-615, July.
    5. J. Hirshleifer, 1966. "Investment Decision Under Uncertainty: Applications of the State-Preference Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 80(2), pages 252-277.
    6. Hammond, Peter J, 1990. "Theoretical Progress in Public Economics: A Provocative Assessment," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 6-33, January.
    7. Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-597, September.
    8. Diewert, W E, 1981. "The Measurement of Deadweight Loss Revisited," Econometrica, Econometric Society, vol. 49(5), pages 1225-1244, September.
    9. Edward E. Schlee, 2013. "Surplus Maximization and Optimality," American Economic Review, American Economic Association, vol. 103(6), pages 2585-2611, October.
    10. Arrow, Kenneth J & Lind, Robert C, 1970. "Uncertainty and the Evaluation of Public Investment Decisions," American Economic Review, American Economic Association, vol. 60(3), pages 364-378, June.
    11. J. R. Hicks, 1942. "Consumers' Surplus and Index-Numbers," Review of Economic Studies, Oxford University Press, vol. 9(2), pages 126-137.
    12. Silberberg, Eugene, 1972. "Duality and the Many Consumer's Surpluses," American Economic Review, American Economic Association, vol. 62(5), pages 942-952, December.
    13. Bruce, Neil, 1977. "A Note on Consumer's Surplus, the Divisia Index, and the Measurement of Welfare Changes," Econometrica, Econometric Society, vol. 45(4), pages 1033-1038, May.
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    More about this item

    Keywords

    Local cost–benefit analysis; Consumers’ surplus; Divisia index; Slutsky compensation; Coefficient of resource utilization;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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