On measurability and comparability: Comment on Pauwels's “the implicit welfare weights used when maximizing aggregate surplus” |
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Authors: | Udo Ebert |
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Institution: | (1) Present address: Department of Economics, University of Oldenburg, P. O. Box 25 03, D-26111 Oldenburg, Germany |
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Abstract: | The note demonstrates that the unweighted sum of the Hicksian equivalent variations is not a reasonable welfare indicator if consumers have different wages. It recommends the unweighted sum of the individual money metrics, all evaluated at thesame reference pricesand reference wage. For this measure the comparability and necessary measurability of utility functions and welfare changes can be guaranteed. In contrast to Pauwels's measure the indicator proposed possesses the properties one expects. |
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