Scitovsky Reversals and Efficiency Criteria in Policy Analysis
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Andrew Schmitz
Lawyers and philosophers have used the Scitovsky paradox to discredit cost-benefit analyses. His paradox is used as a criticism of the potential compensation criterion. But the occurrence of reversals is severely limited. The Compensation Principle, even with its potential nature, requires that compensation actually could be paid. Based on many empirical cost-benefit studies, the actual cost of compensation, which includes transaction costs, can be large. The attempt at actual compensation could turn a highly desirable project into a highly undesirable one, as the benefit-cost ratio could change from greater than one to less than one. The proper justification for using BCA is the Pareto principle considered across a portfolio of projects not the Compensation Principle.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Articles in the same Issue
- Article
- Special Issue in Memory of Bruce Gardner 1942-2008: Dedication and Introduction
- Monopoly Power, Futures Market Manipulation, and the Oil Price Bubble
- Scitovsky Reversals and Efficiency Criteria in Policy Analysis
- Public vs. Private Good Research at Land-Grant Universities
- Will Recreation Demand for Land Limit Biofuels Production?
- The Economics of the U.S. Ethanol Import Tariff with a Blend Mandate and Tax Credit
- Does a Rising Biofuels Tide Raise All Boats? A Study of Cash Rent Determinants for Iowa Farmland under Hay and Pasture
- The Economics of Biofuel Policy and Biotechnology
- Biofuels, Policy Options, and Their Implications: Analyses Using Partial and General Equilibrium Approaches
Articles in the same Issue
- Article
- Special Issue in Memory of Bruce Gardner 1942-2008: Dedication and Introduction
- Monopoly Power, Futures Market Manipulation, and the Oil Price Bubble
- Scitovsky Reversals and Efficiency Criteria in Policy Analysis
- Public vs. Private Good Research at Land-Grant Universities
- Will Recreation Demand for Land Limit Biofuels Production?
- The Economics of the U.S. Ethanol Import Tariff with a Blend Mandate and Tax Credit
- Does a Rising Biofuels Tide Raise All Boats? A Study of Cash Rent Determinants for Iowa Farmland under Hay and Pasture
- The Economics of Biofuel Policy and Biotechnology
- Biofuels, Policy Options, and Their Implications: Analyses Using Partial and General Equilibrium Approaches
