On Wed, 24 Jul 1996, Gil Skillman wrote:
> consistently applied. See separate post for details, but the basic problem
> is that the compensation principle sounds good in isolation but is
> impractical at best---in strictly neoclassical terms--- when applied to any
> concrete situation. Here's the problem: how would anybody determine what
> the appropriate level of compensation is? Doesn't only the potentially
> injured party know? And especially if it is known that the compensation
> would only be "hypothetical" (see Jim D's recent post), wouldn't that party
> insist that the relevant compensation would be virtually infinite? And how
> could anyone prove any such claim wrong?
> In light of these (entirely individualistic) considerations, the
> compensation principle is hoist on its own neoclassical petard.
>
> So the neoclassical bottom line on these issues, I think, remains that of
> the Arrow impossibility theorem, which rules out such compensation tests.
> This is not to deny Gene's point that misguided neoclassicals persist in
> invoking them; it does deny that they are "reasonable" in doing so.
>
Gil,
Dont't individuals determine the value of what they are will to
trade for in any ideal "free excahnge' situation?
Also see my last post - I think this stuff can be turned on its
head as well by applying "relative" compensation tests and comming out
with redistributive "truely social welfare increasing" social pricing
schemes as existed before deregualtionn in telecommunications.
In Solidarity and in a Rush!,
Ron Baiman
Roosevelt Univ, Chicago
