Applied Welfare Indicators and the Economics of Exhaustible Resources

  • George McKenzie
Conference paper


In the past, many economists writing on the subject of exhaustible resources have utilized the concept of consumer surplus as the benefit function to be evaluated [e.g. Hotelling, 1931; Manne]. Unfortunately, as is well-known, this measure, first proposed by Dupuit in 1844, is fraught with difficulties. However, many economists have doggedly refused to abandon consumer surplus procedures, largely on the grounds that no suitable alternative exists. Fortunately, this is no longer the case. In this paper, I propose to develop a simple computational procedure for accurately approximating welfare variations. The method represents an extension of the procedures discussed by Pearce and myself [1976, 1982a].


Demand Function Marginal Utility Consumer Surplus Welfare Indicator Benefit Function 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Antonelli, G.B.: Sulla teoria matematica della economia politica. Pisa 1886; English translation “On the Mathematical Theory of Political Economy” J.S. Chipman et al. Preferences, Utility and Demand. New York 1971, 332–364.Google Scholar
  2. Hildebrand, F.B.: Introduction to Numerical Analysis. New York 1974.Google Scholar
  3. Hotelling, H.: The Economics of Exhaustible Resources. Journal of Political Economy 39, 1931, 137–175.CrossRefGoogle Scholar
  4. Hotelling, H.: The General Welfare in Relation to Problems of Taxation and of Railway and Utility Rates. Econometrica 6, 1938, 242–269.CrossRefGoogle Scholar
  5. Houthakker, H.S.: Additive Preferences. Econometrica 28, 1960, 62–87.CrossRefGoogle Scholar
  6. Manne, A.S.: ETA: A Model for Energy Technology Assessment. Bell Journal of Economics 7, 1976, 379–406.CrossRefGoogle Scholar
  7. McKenzie, G.W.: Measuring Gains and Losses. Journal of Political Economy 84, 1976, 641–646.CrossRefGoogle Scholar
  8. McKenzie, G.W.: Consumer’s Surplus Without Apology: A Comment. American Economic Review 69, 1979, 465–468.Google Scholar
  9. McKenzie, G.W.: New Methods for Measuring Economic Welfare. Cambridge 1982.Google Scholar
  10. McKenzie, G. W., and I.F. Pearce: Exact Measures of Welfare and the Cost of Living. Review of Economic Studies 43, 1976, 465–468.CrossRefGoogle Scholar
  11. McKenzie, G. W., and I.F. Pearce: Welfare Measurement — A Unification. American Economic Review 72, 1982.Google Scholar
  12. Pearce, I.F.: A Contribution to Demand Analysis. Oxford 1964.Google Scholar
  13. Samuelson, P.A.: Constancy of the Marginal Utility of Income. Studies in Mathematical Economics and Econometrics. Ed. by O. Lange, F. Mclntyre, and T.O. Yntema, Chicago 1942.Google Scholar
  14. Samuelson, P.A.: Complementarity — An Essay on the 40th Anniversary of the Hicks-Allen Revolution in Demand Theory. Journal of Economic Literature 12, 1255–89.Google Scholar
  15. Vartia, Y. O.: Efficient Methods of Measuring Welfare Change and Compensated Income in Terms of Market Demand Functions. Keskustelvaiheta Discussion Papers, No. 20. The Research Institute of the Finnish Economy, Helsinki 1978.Google Scholar
  16. Willig, R.D.: Consumer’s Surplus Without Apology: Reply. American Economic Review 69, 1979, 469–474.Google Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 1982

Authors and Affiliations

  • George McKenzie

There are no affiliations available

Personalised recommendations