Compensation principle

Compensation principle

In welfare economics, the compensation principle refers to a decision rule used to select between pairs of alternative feasible social states. One of these states is the hypothetical point of departure ("the original state"). According to the compensation principle, if the prospective gainers could compensate (any) prospective losers and leave no one worse off, the other state is to be selected (Chipman, 1987, p. 524). An example of a compensation principle is the Pareto criterion in which a change in states entails that such compensation is not merely feasible but required. Two variants are:

  • the Pareto principle, which requires any change such that all gain.
  • the (strong) Pareto criterion, which requires any change such that at least one gains and no one loses from the change.

In non-hypothetical contexts such that the compensation occurs (say in the marketplace), invoking the compensation principle is unnecessary to effect the change. But its use is more controversial and complex with some losers (where full compensation is feasible but not made) and in selecting among more than two feasible social states. In its specifics, it is also more controversial where the range of the decision rule itself is at issue.

Uses for the compensation principle include:

See also

References


Wikimedia Foundation. 2010.

Игры ⚽ Нужно решить контрольную?

Look at other dictionaries:

  • compensation principle — theory that an economic policy is desirable if it is beneficial to some of the population and enables compensation for damages that result …   English contemporary dictionary

  • Compensation — • Denotes the price paid for human exertion or labour Catholic Encyclopedia. Kevin Knight. 2006. Compensation     Compensation     † …   Catholic encyclopedia

  • Compensation — Com pen*sa tion, n. [L. compensatio a weighing, a balancing of accounts.] 1. The act or principle of compensating. Emerson. [1913 Webster] 2. That which constitutes, or is regarded as, an equivalent; that which makes good the lack or variation of …   The Collaborative International Dictionary of English

  • Compensation balance — Compensation Com pen*sa tion, n. [L. compensatio a weighing, a balancing of accounts.] 1. The act or principle of compensating. Emerson. [1913 Webster] 2. That which constitutes, or is regarded as, an equivalent; that which makes good the lack or …   The Collaborative International Dictionary of English

  • Compensation pendulum — Compensation Com pen*sa tion, n. [L. compensatio a weighing, a balancing of accounts.] 1. The act or principle of compensating. Emerson. [1913 Webster] 2. That which constitutes, or is regarded as, an equivalent; that which makes good the lack or …   The Collaborative International Dictionary of English

  • compensation recovery — the clawback by a government agency of a proportion or all of the damages awarded or agreed to be paid to a person in respect of certain state benefits obtained by that person in consequence of an accident, injury or disease. In principle, this… …   Law dictionary

  • Compensation Act 2006 — The Compensation Act 2006[1] Parliament of the United Kingdom Long title An Act to specify certain factors that may be taken into account by a court dete …   Wikipedia

  • compensation — noun /ˌkɒmpɛnˈseɪʃən/ a) The act or principle of compensating. b) That which constitutes, or is regarded as, an equivalent; that which makes good the lack or variation of something else; that which compensates for loss or privation; amends;… …   Wiktionary

  • Non-aggression principle — Part of a series on Libertarianism …   Wikipedia

  • Motion compensation — is an algorithmic technique employed in the encoding of video data for video compression, for example in the generation of MPEG 2 files. Motion compensation describes a picture in terms of the transformation of a reference picture to the current… …   Wikipedia

Share the article and excerpts

Direct link
… Do a right-click on the link above
and select “Copy Link”