Mixed Approaches: Production and Distribution
In this chapter we shall discuss three approaches that recognize the limitations inherent in a criterion limited to unanimity or level of production. All three explicitly consider distribution, the first two admitting social orderings of different distributions, the third evoking an empirical generalization about the distributional impact of a sequence of production changes. They are, respectively, the approaches of I. M. D. Little, Franklin M. Fisher, and J. R. Hicks.
We turn first to the approach followed by I. M. D. Little in his A Critique of Welfare Economics.1 Little attempts to retain the Scitovsky criterion along with the assumption that "relative" real income distributions can be evaluated. Briefly, his approach is to compare an initial position -- which, because of its asymmetric treatment in the analysis, is to be interpreted as a true starting situation -- with an altered state possessing a different level of production and different welfare distributions, and a redistribution of the initial state, possessing the same relative distribution as in the altered state, without a change in production. To illustrate the aforementioned asymmetry, no redistribution of the altered state is envisaged in the comparison. In order that a decision be____________________