On the difficulty of combining actual and potential criteria for an increase in social welfare (Q5927699)

The paper discusses problems associated with the extension of the Pareto principle to include potential alternatives. The extensions considered are the KHSC (Kaldor-Hicks-Scitovsky) and the CMS (Chipman-Moore-Samuelson) criteria. The possibility of an intransitive use of the KHSC criterion and the use of CMS in a way that violates the Pareto principle are investigated. The results of the study show that necessary and sufficient conditions for consistency of CMS with the Pareto principle and for transitivity of KHSC require that the Pareto quasi-ordering be a subrelation of the CMS one. This result is furthermore shown to be equivalent to the non-crossing of utility frontiers.