Pigovian approach, Public Economics

PIGOVIAN APPROACH 

Pigou assumed  that  the aim  of  social policy is  to  'promote welfare'. But  in order to simplifL  this, he chose to restrict the range of his inquiry to 'that  part of social welfare  that  can be  brought  directly or  indirectly  into  relationship with  the measuring rod of money'. He  therefore suggested  that, "this part  of welfare may be  called economic welfare". For an  individual, Pigou identified economic welfare  with  satisfaction  by  assuming expected  and realised Welfare Economics  satisfaction from economic activity  to  be equal except  in  the case  of  the saving decision. 

Pigou had assumed measurability and interpersonal comparison of utility, and had  drawn some conclusions  from  the  premise that aggregate social utility ought to be maximised. He explained this through the concept of 'ideal output or ideal allocation'. 

For Pigou, a  situation  'in which each several sort of resource  is allocated  in such a way that the  last unit of it  in any one use yields a physical product of the same money value as  the  last unit of  it in any other use'  is one  of  ideal allocation, irrespective of  the distribution  of  money incomes.  If it  is  a community comprising  rich  and poor people, then  'though  it  is  true  that aggregate satisfaction can  be  increased  by  departures from this  type  of allocation in ways deliberately designed to benefl poor people,  it  is probable that departures taken at random,  e.g.,  through  the  operation of monopoly power, would diminish aggregate satisfaction'. Therefore, according to Pigou, such an allocation is properly called the ideal allocation with respect  to  the existing distribution of money income. 

Posted Date: 10/26/2012 5:46:47 AM | Location : United States







Related Discussions:- Pigovian approach, Assignment Help, Ask Question on Pigovian approach, Get Answer, Expert's Help, Pigovian approach Discussions

Write discussion on Pigovian approach
Your posts are moderated
Related Questions
One of these is deregulator or privatization of public enterprises or utilities. Deregulation is a world wide phenomenon. But experience of power failure in California and Mumbai r

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

What are the properties and limitations of GDP as a social welfare function?

Jack and Jill live alone on an island. Their labour supply schedules are identical and given by L = (1 - t)w, where t is the income tax rate and w denotes the wage. Jill''s wage

QUESTION 1: Assuming that you are a consultant on the ‘Light Rail' project and you are asked to forecast demand for this mode of transport. What are the forecasting techniq

Q. Importance of heterogeneity? The importance of heterogeneity for public policy process can be summarized in two propositions. - Heterogeneity or conflict of interests is

what are the costs and consequences of providing the subsidies and welfare?

Theory of optimal tax system is relevant for tax policy issue

The most significant area or tool for making a suggestion to a journalist or media is the press release, which is more available these days. One has to put, a press release is a ps

Q. Who permits government whatever it does? The simple answer can be: people in a democracy and the monarch/dictator in a monarchy/dictatorship. But neither monarchy exists in