MEASURABLE, TRANSFERABLE, COMPARABLE UTILITY AND MONEY
YALE UNIV NEW HAVEN CT COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
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Conclusions The problems of ordinality, measurability, transferability and the use of money are different but highly related. Ordinality and cardinality concern individual preferences. Cardinality can be obtained from the ordinal properties of preferences either by considering behavior under risk, or by assuming a very special form for the utility functions this form is related to but different from the assumption of something called money with a constant marginal utility to all. The existence of transferability is equivalent to the Pareto optimal surface being flat in at least some part of the distribution space. The existence of both transferability and comparability calls for the Pareto optimal surface to be flat in both the distribution space and the utility space. The importance of different assumptions concerning measurability and comparability arises when welfare decisions employing criteria of equality or fairness are applied or when other solution concepts are utilized instead of the competitive market mechanism. Although it is conjectured that flatness in the distribution space is a good approximation in large neighborhood, even if it were false, it is suggested that the investigation of the shape of induced utility functions and the shape of the Pareto optimal surface is an important preliminary to a positive welfare theory.
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