Compensation theory of economic welfare.docx (original) (raw)

The paper discusses the Compensation Theory of Economic Welfare, which posits that one state is chosen over another if it benefits one party while allowing for compensations to the disadvantaged, thus maintaining initial welfare levels. However, it critiques traditional welfare economics, particularly the Paretian and Scitovsky criteria, for their inadequacies in comprehensively addressing welfare implications. The work emphasizes the challenges of creating a universally valid welfare criterion and highlights the intrinsic value judgments that complicate welfare comparisons among individuals.