Compensation Principle
A notable advance in welfare economics since Pareto has been the Compensation principle. which is associated generally with the names of Waldorf Hicks and Tchaikovsky Assumptions. The important assumptions on which this principle is based re as follows
This principle can be privileged as follows Let us consider the effects of economic policy introduced by the Go in a society It is possible then to divide into three categories those gain those who would lose and those remain unaffected Tn Dickensian terming s of indifference curves it means to a higher indifference curve and er indifference curve and still others w n the same indifference curve ere med about the wan sties of satisfy that those who remain on the same e curve are quite indifferent about the e are therefore lest with the gainers ans suppose he persons who have gained e the losers can offer them sooth the loser as loving them back to their Terence curve. If the gainers are in a the losers to their original posit s move to an indifference curve they were on after the initial change on the indifference curve they were I C Before the policy measure took place taken place in this situation that can an increase in welfare on the part lording to the advocates of this doctrine labelled as an increase in welfare.
