Scitovsky paradox

The Scitovsky paradox is a theory which states that in welfare economics there is no increase in social welfare by a return to the original part of the losers. It is named after the Hungarian born American economist, Tibor Scitovsky.

What he demonstrated was that if an allocation A is deemed superior to another allocation B by the Kaldor compensation criteria, by a subsequent set of moves by the same criteria, we can prove that B is also superior to A.

The paradox occurs when the gainer from the change of allocation A to allocation B can compensate the loser for making the change, but the loser could also then compensate the gainer for going back to the original position.

Economic paradoxes (list)

Allais Antitrust Arrow information Bertrand Braess's Competition Demographic-economic Downs–Thomson Easterlin Edgeworth Ellsberg European Gibson's Giffen good Icarus Jevons Leontief Lucas Mandeville's Mayfield's Metzler Plenty Productivity Prosperity Scitovsky Service recovery St. Petersburg Thrift Toil Tullock Value

Scitovsky paradox

Further reading