A metric for assessing the “goodness” of income distributions and the effect of price changes

Social welfare evaluation depends in part on value judgments as to income distribution. This paper proposes a metric for assessing the “goodness” of particular income distributions. That metric is then used to examine the effect of price changes on the “goodness” of a given distribution. Consider an increase in the price of a commodity that is disproportionately consumed by households with incomes that are high relative to the preferred income distribution. One naturally supposes that such a price increase will make the given income distribution appear less bad. Surprisingly, this is not invariably the case.