Prague Economic Papers 2008, 17(3):230-242 | DOI: 10.18267/j.pep.331

History and troubles of consumer surplus

Miroslav Svoboda
University of Economics, Prague (svobodam@vse.cz).

The paper is focused on history of the concept of consumer surplus presented by Alfred Marshall as an economic tool to measure benefits and losses resulting from changes in market conditions. As it assumes constant marginal utility of money, it was refused by further development of economics. Subsequently, John Hicks redefined the concept using indifference analysis, inducing the use of compensating and equivalent variations in welfare economics. However, we reveal substantial errors in the Kaldor-Hicks-efficiency justification of economic policy and suggest an alternative use for the concept of consumer surplus - in an analysis of economic discrimination.

Keywords: consumer surplus, compensating variation, Alfred Marshall, John Hicks
JEL classification: D61, N30

Published: January 1, 2008  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Svoboda, M. (2008). History and troubles of consumer surplus. Prague Economic Papers, 17(3), 230-242. doi: 10.18267/j.pep.331
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Bishop, R. L. (1943), "Consumer's Surplus and Cardinal Utility". The Quarterly Journal of Economics, 57 (3, May), pp. 421-449. Go to original source...
    2. Bishop, R. L. (1946), "Professor Knight and the Theory of Demand". The Journal of Political Economy, 54 (2, April), pp. 141-169. Go to original source...
    3. Cannan, E. (1924), "Total Utility" and "Consumer's Surplus". Economica, (10, February), pp. 21-26. Go to original source...
    4. Currie, J. M., Murphy, J. A., Schmitz, A. (1971), "The Concept of Economic Surplus and Its Use in Economic Analysis". The Economic Journal, 81, (324, December), pp. 741-799. Go to original source...
    5. Dooley, P. C. (1983), "Consumer's Surplus: Marshall and His Critics". The Canadian Journal of Economics /Revue canadienne d'Economique, 16, (1, February), pp. 26-38. Go to original source...
    6. Gravelle, H., Rees, R. (1992), Microeconomics. London and New York : Longman.
    7. Hausman, J. A. (1981), "Exact Consumer's Surplus and Deadweight Loss". The American Economic Review, 71 (4, September), pp. 662-676.
    8. Haveman, R. H., Gabay, M., Andreoni, J. (1987), "Exact Consumer's Surplus and Deadweight Loss, A Correction". The American Economic Review, 77 (3, June), pp. 494-495.
    9. Henderson, A. (1941), "Consumer's Surplus and the Compensating Variation". The Review of Economic Studies, 8 (2, February), pp. 117-121. Go to original source...
    10. Hicks, J. R. (1939), "The Foundations of Welfare Economics". The Economic Journal, 49 (196, December), pp. 696-712. Go to original source...
    11. Hicks, J. R. (1941), "The Rehabilitation of Consumers' Surplus". The Review of Economic Studies, 8 (2, February), pp. 108-116. Go to original source...
    12. Hicks, J. R. (1942), "Consumers' Surplus and Index-Numbers". The Review of Economic Studies, 9 (2, Summer), pp. 126-137. Go to original source...
    13. Hicks, J. R. (1943), "The Four Consumer's Surpluses". The Review of Economic Studies, 11 (1, Winter), pp. 31-41. Go to original source...
    14. Hicks, J. R. (1945), "The Generalised Theory of Consumer's Surplus". The Review of Economic Studies, 13 (2), pp. 68-74. Go to original source...
    15. Holman, R. et al. (2001), Dějiny ekonomického myšlení. Praha : C. H. Beck.
    16. Houghton, R. W. (1958), "A Note on the Early History of Consumer's Surplus". Economica, New Series, 25 (97, February), pp. 49-57. Go to original source...
    17. Irvine, I. J., Sims, W. A. (1998), "Measuring Consumer Surplus with Unknown Hicksian Demands". The American Economic Review, 88 (1, March), pp. 314-322.
    18. Kaldor, N. (1939), "Welfare Propositions of Economics and Interpersonal Comparisons of Utility". The Economic Journal, 49 (195, September), pp. 549-552. Go to original source...
    19. Knight, F. H. (1944), "Realism and Relevance in the Theory of Demand". The Journal of Political Economy, 52 (4, December), pp. 289-318. Go to original source...
    20. Marshall, A. (1947 [1890]), Principles of Economics. London : Macmillan.
    21. Mayer, J. (1926), "Consumer's Surplus". The American Economic Review, 16 (1, March), pp. 77-80.
    22. Miller, H. E. (1927), "Utility Curves, Total Utility, and Consumer's Surplus". The Quarterly Journal of Economics, 41 (2, February), pp. 292-316. Go to original source...
    23. Mishan, E. J. (1947), "Realism and Relevance in Consumer's Surplus". The Review of Economic Studies, 15 (1), pp. 27-33. Go to original source...
    24. Pfouts, R. W. (1953), "A Critique of Some Recent Contributions to the Theory of Consumers' Surplus". Southern Economic Journal, 19 (3, January), pp. 315-333. Go to original source...
    25. Šťastný, D. (2006), "Konkurence a hospodářská politika: o hledání dokonalosti". Acta Oeconomica Pragensia, 14 (2), pp. 67-83.
    26. Varian, H. R. (1993), Intermediate Microeconomics: A Modern Approach. New York : W. W. Norton.

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content