PHIL2116 Lecture Notes - Lecture 11: Pareto Efficiency, Prudence, Tute
Document Summary
Should poli cy -m akers di scount t he fu t ure, determining which public projects are worthwhile. People who exist but would otherwise not existed. Given uncertainty and disagreement about such comprehensive assessments of social welfare, economists aim for more limited comparisons of options based on market prices. Strictly speaking: look for pareto improvements via market price indicators, and suspend judgment otherwise. Market prices, under certain assumptions, do allow economists to identify clear. Assumption 1: costs and benefits accrue to the same individuals. Assumption 2: market prices of goods reflect, for all persons, the welfare value of obtaining an extra unit of that good (since all have diminishing marginal welfare for the good). Example: the status quo is that wine costs per bottle. But it is possible to implement a public works scheme whereby all pay and receive just over two bottles of wine. This is a clear pareto improvement on the status quo.
