The Pigou–Dalton principle (PDP) is a principle in
welfare economics
Welfare economics is a field of economics that applies microeconomic techniques to evaluate the overall well-being (welfare) of a society.
The principles of welfare economics are often used to inform public economics, which focuses on the ...
, particularly in
cardinal welfarism. Named after
Arthur Cecil Pigou
Arthur Cecil Pigou (; 18 November 1877 – 7 March 1959) was an English economist. As a teacher and builder of the School of Economics at the University of Cambridge, he trained and influenced many Cambridge economists who went on to take chair ...
and
Hugh Dalton
Edward Hugh John Neale Dalton, Baron Dalton, (16 August 1887 – 13 February 1962) was a British Labour Party (UK), Labour Party economist and politician who served as Chancellor of the Exchequer from 1945 to 1947. He shaped Labour Party foreig ...
, it is a condition on
social welfare function
In welfare economics and social choice theory, a social welfare function—also called a social ordering, ranking, utility, or choice function—is a function that ranks a set of social states by their desirability. Each person's preferences ...
s. It says that, all other things being equal, a
social welfare function
In welfare economics and social choice theory, a social welfare function—also called a social ordering, ranking, utility, or choice function—is a function that ranks a set of social states by their desirability. Each person's preferences ...
should prefer allocations that are more equitable. In other words, a transfer of some defined variable (for example utility or income) from the rich to the poor is desirable, as long as it does not bring the rich to a poorer situation than the poor.
Formally,
let
and
be two utility profiles. Suppose that at the first profile:
: