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- Title
MONEY METRICS IN APPLIED WELFARE ANALYSIS: A SADDLEPOINT REHABILITATION.
- Authors
Schlee, Edward E.; Khan, M. Ali
- Abstract
Once a popular tool to estimate welfare changes, the money metric of McKenzie‐Samuelson gradually faded from use after welfare theorists and practitioners argued that it led to inegalitarian recommendations. We prove that, at a competitive equilibrium price, any associated competitive allocation maximizes the money‐metric sum; and, as is well understood, competitive allocations can be egalitarian or inegalitarian. The result applies to economies in which individual demand is not rationalizable by any binary relation, let alone a binary relation representable by a utility function, a behavioral setting considered, for example, in Bernheim–Rangel.
- Subjects
UTILITY functions; REHABILITATION; EQUILIBRIUM
- Publication
International Economic Review, 2022, Vol 63, Issue 1, p189
- ISSN
0020-6598
- Publication type
Article
- DOI
10.1111/iere.12535