On Wed, 24 Jul 1996, Gil Skillman wrote: > > This is a good point--I neglected this "out" in my earlier posts. As Jim > suggests the notion of "hypothetical compensation" is completely bankrupt > without, at the least, additional conditions on distribution. For example, > a person can be made willing to accept (hypothetical) compensation for > pollution that will kill her in 20 years, IF she is on the verge of starving > today. But that hardly makes it acceptable. > > For what it's worth, the notion of (hypothetical) compensation is also > criticized among neoclassicals, and typically isn't invoked without hedging, > in light of this. > But in applied work "consumer surplus"' and the compensations tests to justify it is still very much acceptable ! In fact I'm rehashing an old paper on this for the summer conference which analyses the Telecom policy efects of this line of thinking and serves as an "immanent critique" of NC using NC methods by deriving a "progressive Marginal cost = P" and "prgressive inverse elasticity rule" using NC methods which I think have there place at a lower (ind choice level) of the economy. Essentially its clear that consumer surplus is just back door utility comparison so why not do it more accurately relative to income or wealth? Cheers, Ron Baiman Roosevelt Univ., Chicago
