Monash University
Browse
monash_6985.pdf (876.88 kB)

The Paradox of Interpersonal Cardinal Utility: A Proposed Solution

Download (876.88 kB)
journal contribution
posted on 2017-06-08, 00:28 authored by Ng, Yew-Kwang
The impossibility theorems of Arrow, Sen, Kemp-Ng, and Parks show that interpersonally comparable individual cardinal utilities are needed for making social decisions. But virtually all economists regard cardinal utility and interpersonal comparisons of utility as practically impossible to obtain, if not conceptually meaningless and/or scientifically inadmissible. This paradox (Section 1) can be largely solved by a simple method (Section 2). Almost incredibly, this simple method calls for treating a dollar as a dollar except in the general tax/transfer system. This achieves a tremendous simplification in the formulation of economic policy in general and in cost-benefit analysis in particular. More astonishingly, pursued to its logical conclusion (Section 3), the argument compels us to say that, economists, as a group, should be in favour of the reversed weighting system (counting a dollar to the poor as worth less than a dollar to the rich)! The separation of "polity" (where "one person one vote" instead of "a dollar is a dollar" applies) from "economy" is mainly sustained by the attitudes of non-economists (Section 4).

History

Year of first publication

1996

Series

Department of Economics.

Usage metrics

    Categories

    No categories selected

    Exports

    RefWorks
    BibTeX
    Ref. manager
    Endnote
    DataCite
    NLM
    DC