PARETO AND PIGOU ON OPHELIMITY, UTILITY AND WELFARE: IMPLICATIONS FOR PUBLIC FINANCE by

In view of the distinct and seminal contributions of Pareto and Pigou to the economics of welfare, Pigou’s enduring influence in the field of public finance and Pareto’s hostility to developments in that field of study, the lack of a comparative study of their contributions is unfortunate. This study contrasts the place of ophelimity and utility and in these authors’ approaches to welfare studies. Attention is also given to the place of individuals’ consciousness of consumption by others in the treatment of economic welfare and total welfare. It is found that the substantive differences in the welfare studies of these two scholars have less to do with Pigou’s direct and Pareto’s less direct materialistic focus of welfare economics or the differing ordinal/cardinal dimensions to their analysis, than with Pareto’s and Pigou’s diverse views: on the theoretical representation of the economic phenomenon when individual behaviour is influenced by the consumption by others; and on the character of science. These last two differences are important because they have direct consequences for the scope of economic and social welfare theories and the choice between an economic or a sociological basis for the study of public finance. * I would like to thank Amedeo Fossati and Aldo Montesano, for their helpful comments on an earlier draft of this paper, and to acknowledge Ms Karen Knight, for the discussions we have had on welfare issues that have benefited this study.