This document provides an overview of welfare economics concepts, including:
1) It discusses how welfare depends on households' consumption bundles and preferences, using indifference curves and budget constraints.
2) Measuring utility is challenging since it is not directly observable, only ordinally measurable. Welfare economics uses the Pareto principle to compare states without cardinal utility measurements.
3) The Pareto principle states that a state is preferred if it makes at least one household better off without harming others (weak criterion) or makes some better off and none worse off (strong criterion).
4) A Pareto optimal state cannot be improved upon without making someone worse off. This allows welfare comparisons without interpersonal utility comparisons
Welfare economics is the study of how the allocation of
resources and goods affects social welfare. This relates directly
to the study of economic efficiency and income distribution, as
well as how these two factors affect the overall well-being of
people in the economy. In practical terms, welfare economists
seek to provide tools to guide public policy to achieve beneficial
social and economic outcomes for all of society. However,
welfare economics is a subjective study that depends heavily on
chosen assumptions regarding how welfare can be defined,
measured, and compared for individuals and society as a
whole.
Welfare economics is the study of how the allocation of
resources and goods affects social welfare. This relates directly
to the study of economic efficiency and income distribution, as
well as how these two factors affect the overall well-being of
people in the economy. In practical terms, welfare economists
seek to provide tools to guide public policy to achieve beneficial
social and economic outcomes for all of society. However,
welfare economics is a subjective study that depends heavily on
chosen assumptions regarding how welfare can be defined,
measured, and compared for individuals and society as a
whole.
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
what is the best method to sell pi coins in 2024DOT TECH
The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
what is the best method to sell pi coins in 2024DOT TECH
The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
how can I sell my pi coins for cash in a pi APPDOT TECH
You can't sell your pi coins in the pi network app. because it is not listed yet on any exchange.
The only way you can sell is by trading your pi coins with an investor (a person looking forward to hold massive amounts of pi coins before mainnet launch) .
You don't need to meet the investor directly all the trades are done with a pi vendor/merchant (a person that buys the pi coins from miners and resell it to investors)
I Will leave The telegram contact of my personal pi vendor, if you are finding a legitimate one.
@Pi_vendor_247
#pi network
#pi coins
#money
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
2. 2
I Welfare of the Household
Objective
In welfare economics we are interested in being able
to rank different social states (or allocations of
resources).
Society’s welfare ultimately depends on the welfare
of its constituent households.
Therefore to make value judgements of the
desirability of different social states to society we
need to have a theory of household behaviour.
Put another way, we are interested in how
households rank different social states.
3. 3
I Welfare of the Household
Two key assumptions
Welfarism = social welfare depends only on the
welfare of households, which depends on the bundle
of commodities consumed.
Non-paternalism = individualism = the welfare of
the household must correspond with the household’s
own view of its welfare, or at least be consistent with
the household’s preferences = social welfare must
respect household preferences
4. 4
Part I: Welfare of the Household
Preference orderings over alternative bundles of
commodities
Simple economic model = a household must choose
how to spend its income on different goods. This is
the household’s utility maximisation problem.
The household chooses among available bundles of
commodities on the basis of its preferences.
Commodity bundles
x = (x1, x2, …., xn ) [1]
5. 5
I Welfare of the Household
Utility functions
The utility function depicts the relationship between
the level of satisfaction reached by a household and
the amounts of different commodities it consumes.
U = u(x1, x2, …., xn ) [2]
The utility function can be used to compare any
number of commodity bundles.
Indifference curves
Indifference curves provide a locus of points
representing combinations of two commodities (x1
and x2) between which the consumer is indifferent
(i.e. has equal utility).
There are an infinite number of indifference curves,
each corresponding to a given level of utility, and
they cannot intersect.
6. 6
I Welfare of the Household
Marginal rate of substitution (MRS)
MRS is the amount of good y that must be given up
per unit of x gained if the consumer is to remain at
the same level of utility
MRS is equal to the slope of the indifference curve
at any one point
Algebraically, MRS = [3]
Convexity of indifference curves represents a
diminishing MRS
dx
dy
7. 7
I Welfare of the Household
The budget set and budget constraint
A household receives an income y and faces a set of
prices p for commodities given by
p = p(p1, p2, …., pn ) [4]
for each good x = (x1, x2, …., xn )
The budget constraint is given by
[5]
The budget set is the set of different bundles that it
is feasible to consume so that
[6]
y
x
p
n
i
i
i
1
y
x
p
n
1
i
i
i
8. I Welfare of the Household
Budget Set and Constraint for Two Commodities
x2
x1
Budget constraint is
p1x1 + p2x2 = y.
y/p1
Budget
Set
the collection
of all affordable bundles.
y/p2
9. 9
I Welfare of the Household
A formal statement of the utility maximisation
problem
Maximise U = u(x1, x2, …., xn ) [7]
Subject to
The solution to the utility maximisation problem
requires that the MRS between goods must equal
their price ratio. E.g.
MRS = [8]
y
x
p
n
1
i
i
i
1
2
dx
dx
2
1
p
p
10. 10
I Welfare of the Household
The demand function
Each time the budget constraint changes (due to
changes in prices or incomes) there will be a new
equilibrium. This can be used to derive a relationship
between the optimum amount of a good purchased
(i.e. quantity demanded) and prices and income.
The demand function is given by
xi = x(p1, p2, …, pn, y) [9]
The demand function can be thought of as the
solution to the household utility maximisation
problem.
Given the prices and income facing the household
the demand functions determine the bundles of
goods that yield the highest value of the utility
function.
11. 11
I Welfare of the Household
The indirect utility function
If those demand functions are substituted into the
utility function, the results is the indirect utility
function, which shows the maximum utility that can
be achieved for any set of prices and income.
v(p, y) = v[x1(p, y), x2(p, y), …., xn(p, y)] [10]
12. 12
II. INTRODUCTION TO WELFARE MEASUREMENTS
Welfare economics focuses on using resources optimally
to achieve the maximum well-being for the individuals
in society.
But, unfortunately, agreement cannot always be
reached on what is optimal.
Ethical Assumptions
They are ethical assumptions or value judgments with
which economists may legitimately disagree.
Two of these ethical assumptions are, however,
sufficiently widely accepted that they provide the
foundations for a large part of applied welfare
economics and policy evaluation. They are that
the welfare status of society must be judged solely by
the members of society (also called fundamental ethical
postulate or the principle of individualism) (Quirk and
Saposnik 1968, p. 104); and
13. 13
II. INTRODUCTION TO WELFARE MEASUREMENTS
the notion that society is better off if any member of
society is made better off without making anyone else
worse off (Pareto principle after the founder of the
principle, Vilfredo Pareto (1896)).
Measurement issues
A difficulty with welfare economics is that economic
‘welfare’ is not an observable variable like the number
of machines, houses, market prices or profits.
The economic welfare status of an individual is formally
represented by his or her utility level, a term generally
used synonymously with happiness or satisfaction.
Utility is measured by ‘utils’, which is an imaginary and
not a metric unit.
But one cannot measure the increase in utility by
additional utils obtained from consumption.
14. 14
II. INTRODUCTION TO WELFARE MEASUREMENTS
Consequently, positive economics assumes that utility is
only ordinally measurable, however, normative
economics seeks to measure welfare cardinally. Hence,
Ordinality = the ability to (only) rank alternatives
according to the utility they provide
Cardinality = indicate the magnitude of the change in
utility in moving from one alternative to another (like a
temperature scale)
A cardinal system specifies exactly how much utility
each affected individual would gain or lose from a
proposed policy decision.
Such information would surely be helpful to those
concerned with determining the maximum well-being
for society and would simplify the subject of welfare
economics substantially.
15. 15
II. INTRODUCTION TO WELFARE MEASUREMENTS
Measurability of utility, however, is not sufficient to
determine optimal social choices.
The point is that, even if utility were measurable, there
would still be the problem of how to weight individuals:
welfare weightings
No objective way exists for solving this problem of
interpersonal comparisons.
Since utility is not measurable, an alternative measure
must be chosen.
16. 16
III The Pareto Principle and Pareto Optimality
Background
So far we have been concerned with measuring the
welfare of individual households who are concerned
with maximizing their utility subject to a budget
constraint.
In practice most economies are populated by
millions of households, most of whom have different
tastes and different budget constraints.
Somehow we need to distil welfare statements about
an event from its effects on millions of different
households.
One possible solution is to aggregate household
welfare in a very direct manner by simply adding the
utility of each household together to get a total
utility score for a particular state.
17. 17
III The Pareto Principle and Pareto Optimality
In this way the welfare effects of a particular public
policy could be measured by whether or not the sum
of utilities was raised or lowered. This type of
aggregation requires two very strong and restrictive
assumptions:
1) Cardinality (so that utilities can be measured on a
scale which says by how much a household prefers
one state to another); and,
2) Comparability among household utilities (so that
adding household utilities is possible, like adding
apples and apples rather than apples and oranges
which is meaningless)
Vilfredo Pareto, a great Italian economist was the
first to define concepts of society’s welfare without
having to invoke cardinality and comparability.
18. 18
III The Pareto Principle and Pareto Optimality
The Pareto Principle
Any allocation of goods and services across the
many households in the economy is referred to as a
state of the economy.
Associated with each state is an H element utility
vector (u1, u2, u3, …uH) that gives the level of utility
for every household where H is the number of
households in the economy.
The Pareto Principle allows us to compare the social
welfare of two states by determining whether the
utility vector of one state dominates that of another
state: weak vs strong pareto criterion
19. 19
III The Pareto Principle and Pareto Optimality
1) According to the weak Pareto criterion, if the utility of
every household is higher in state x than state y then
state x yields a higher level of societal welfare than
state y and is preferred.
2) According to the strong Pareto criterion, if the utilities
of some households are higher in state x than in state
y and the utility of no household is lower in state x
than state y then state x yields a higher level of
societal welfare than state y and is preferred.
NB: these Pareto criteria require only very weak
assumptions about the nature of household utilities:
I. only ordinality of utility is needed (not cardinality); &,
II. we do not need to make comparisons about the
utilities of different households, so that units and
levels of utilities need not be comparable across
households.
20. 20
III The Pareto Principle and Pareto Optimality
Pareto optimality
If state x allows a welfare improvement over state y
according to the Pareto criterion, then state x is said
to be Pareto superior to state y, and state y is said
to be Pareto inferior to state x.
If all households enjoy the same level of utility in
state x and state y then states x and y are Pareto
indifferent.
If state x is neither Pareto superior, nor Pareto
inferior, not Pareto indifferent to state y then states
x and y are Pareto non-comparable. Pareto non-
comparable states are ones in which some
households are made better off but others are made
worse off in moving from one state to another.
21. 21
III The Pareto Principle and Pareto Optimality
A feasible state is one that can be achieved given
the economy’s resource constraints.
Any feasible state for which no feasible Pareto
superior state exists (i.e. there is no scope for Pareto
improvement) is said to be Pareto optimal.
If a state is Pareto optimal then there is no change
that can be made in the economy, given current
resource constraints, that can make any household
better off without making another household worse
off.
There are many Pareto optimal states for a set of
feasible states and all Pareto optimal states are
Pareto non-comparable.
22. 22
III The Pareto Principle and Pareto Optimality
Problems with the Pareto Principle
1. The Pareto ranking of states is incomplete (there
exists Pareto non-comparability);
2. The Pareto Principle is neutral to the distribution of
utility – a state of extreme utility disparity can be
superior to one of utility equality providing
somebody is better off and nobody is worse off in
utility terms; and,
3. The Pareto Principle can conflict with liberalism.
23. 23
IV COMPENSATING AND EQUIVALENT VARIATIONS
The two most widely used willingess-to-pay welfare
measures proposed by John R. Hicks (1943, 1956) are
the compensating variation and the equivalent
variation.
The motivation for the Hicksian measures is that an
observable alternative for measuring the intensities of
preferences of an individual for one situation versus
another is the amount of money the individual is willing
to pay or willing to accept to move from one situation to
another.
This principle has become a foundation for modern
applied welfare economics.
The two most important WTP measures are
compensating and equivalent variations.
24. 24
IV COMPENSATING AND EQUIVALENT VARIATIONS
Compensating variation is the amount of money which,
when taken away from an individual after an economic
change, leaves the person just as well off as before.
For a welfare gain, it is the maximum amount that the
person would be willing to pay for the change.
For a welfare loss, it is the negative of the minimum
amount that the person would require as compensation
for the change.
25. 25
IV COMPENSATING AND EQUIVALENT VARIATIONS
Equivalent variation is the amount of money paid to an
individual which, if an economic change does not
happen, leaves the individual just as well off as if the
change had occurred.
For a welfare gain, it is the minimum compensation that
the person would need to forgo the change.
For a welfare loss, it is the negative of the maximum
amount that the individual would be willing to pay to
avoid the change.