History and troubles of consumer surplus
The paper is focused on history of the concept of consumer surplus presented by Alfred Marshall as an economic tool to measure benefits and losses resulting from changes in market conditions. As it assumes constant marginal utility of money, it was refused by further development of economics. Subsequently, John Hicks redefined the concept using indifference analysis, inducing the use of compensating and equivalent variations in welfare economics. However, we reveal substantial errors in the Kaldor-Hicks-efficiency justification of economic policy and suggest an alternative use for the concept of consumer surplus - in an analysis of economic discrimination.
Volume (Year): 2008 (2008)
Issue (Month): 3 ()
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References listed on IDEAS
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- J. R. Hicks, 1941. "The Rehabilitation of Consumers' Surplus," Review of Economic Studies, Oxford University Press, vol. 8(2), pages 108-116.
- Irvine, Ian J & Sims, William A, 1998.
"Measuring Consumer Surplus with Unknown Hicksian Demands,"
American Economic Review,
American Economic Association, vol. 88(1), pages 314-22, March.
- Irvine, I.J. & Sims, W.A., 1995. "Measuring Consumer Surplus with Unknown Hicksian Demands," Working Papers 219, University of Sydney, School of Economics.
- Haveman, Robert H & Gabay, Mary & Andreoni, James R, 1987. "Exact Consumer's Surplus and Deadweight Loss: A Correction," American Economic Review, American Economic Association, vol. 77(3), pages 494-95, June.
- J. R. Hicks, 1942. "Consumers' Surplus and Index-Numbers," Review of Economic Studies, Oxford University Press, vol. 9(2), pages 126-137.
- Hausman, Jerry A, 1981. "Exact Consumer's Surplus and Deadweight Loss," American Economic Review, American Economic Association, vol. 71(4), pages 662-76, September.
- Robert L. Bishop, 1946. "Professor Knight and the Theory of Demand," Journal of Political Economy, University of Chicago Press, vol. 54, pages 141.
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