Resource allocation studies within the framework of public finance theory

Abstract

The welfare concepts enunciated by Pareto in 1909, and refined by Barone in 1935 did not galn widespread attention until the 1930's, when they were seized upon by welfare economists seeking something to fill the vacuum created by Robbins' attack on traditional welfare theory. An unassailable criterion for comparing welfare between two economic states was sought after, and the Pareto criterion seemed to provide such a basis of comparison. Expressed In one of its forms, it states that welfare is increased if at least one person is made better off, and no one worse off, as a result of a change in resource allocation (broadly interpreted to include changes in production and exchange conditions, with or without side payments) . Turning the criterion round to arrive at another formulation: a change in resource allocation which makes at least one person better off, and none worse off, lS an "improvement" (i.e. it increases welfare).