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Scitovsky paradox: The Scitovsky paradox, also known as the double paradox, occurs when a change in economic allocation appears as an improvement under the Kaldor-Hicks efficiency criterion from one perspective but seems worse from another, using the same criterion. This paradox highlights potential inconsistencies in determining economic improvements or welfare changes based solely on compensation tests. See also Kaldor-Hicks Criterion.
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Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments.

 
Author Concept Summary/Quotes Sources

Richard O. Zerbe on Scitovsky Paradox - Dictionary of Arguments

Parisi I 368
Scitovsky Paradox/cost-benefit analysis/Zerbe: There have also been strong statements of BCA inadequacy on technical grounds, mainly on the possibility of Scitovsky reversals. The Scitovsky reversal paradox (Scitovsky 1941)(2) arises when, starting from state of the world A, position B appears superior to A, but when starting from B, A appears superior to B. However, reversal paradoxes such as Scitovsky’s are purely creatures of the PCT (potential compensation test). They arise from the PCT assumption that compensation is costless and that potential compensation is the correct measure. The legal philosopher Coleman (1980(1), pp. 519f) uses an example of reversibility to argue that the Kaldor-Hicks potential compensation test is not a useful criterion for decision-making.
>Cost-benefit analysis
, >Kaldor-Hicks criterion, >Decision-making.
Parisi I 369
(…) in a recent book, Markovits (2008)(3) writes,
“This Scitovsky Paradox invalidates the Kaldor–Hicks test because it implies that, if the test were accurate and a Scitovsky paradox arose, both the policy and its reversal would be economically efficient and, hence, the policy would simultaneously be economically efficient and economically inefficient.” (p. 53)

1. Coleman, Jules L. (1980). “Efficiency, Utility, and Wealth Maximization.” Hofstra Law Review 8: 509.
2. Scitovsky, T. De (1941). “A Note on Welfare Propositions in Economics.” Review of Economic Studies 9: 77–88.
3. Markovits, Richard S. (2008). Truth or Economics: On the Definition, Prediction, and Relevance of Economic Efficiency. New Haven, CT: Yale University Press.


Richard O. Zerbe. “Cost-Benefit Analysis in Legal Decision-making.” In: Parisi, Francesco (ed) (2017). The Oxford Handbook of Law and Economics. Vol 1: Methodology and Concepts. NY: Oxford University.

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Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments
The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.
Zerbe, Richard O.
Parisi I
Francesco Parisi (Ed)
The Oxford Handbook of Law and Economics: Volume 1: Methodology and Concepts New York 2017


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