Kerton’s Consumer Search Capital and Pareto’s Optimality: A Happy Blend for Consumer Welfare

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In a developing country like India the scope for CSK and POA is greater as consumer problems are innumerable and efforts of government agencies are highly inadequate and quite often inefficient too. It would be futile for consumers in India to depend on government agencies only for helping making complaints or for redress, as in many cases government agencies themselves will be culprits. For ex. Food and Civil Supplies Corporation and Seeds and Fertilizers Corporations have never delivered the goods properly. Other countries have also these problems but it is doubtful that their experience can also apply here. It is inevitable that CSK has to be created only through innumerable voluntary consumer organizations that work with devotion and a common objective of consumer service. As the adage goes, “Necessity is the mother of invention”, the consumers in India have been facing a need to help themselves for better service and better living. As a result at present a number of consumer organizations of different types are working in various parts of the country. The corporations, government agencies and public distribution system in India should be effectively reconstituted and made to work effectively so as to realize Pareto optimal consumer welfare. At present production and distribution of consumer goods in India cannot be recognized to increase the utility to more consumers without decreasing the utility of other consumers, hence it becomes Pareto inefficient.

In India the consumer is at a special disadvantage while taking market decisions. In a developing country the consumer is no doubt exposed to the glittering and colorful standard of living that his counterpart in an advanced country enjoys; he too would desire to be placed in a similar situation. But there is constant conflict between his desire promoted wants and need-based requirements. “Wants are insatiable”, says the economist. It is true, but in Indian situation wants are many and resources are few. The gap between production and consumption, between cost of production and price level has never been bridged and the co-ordination of these factors has not been commensurate with each other and the result is an imbalance.

In India more than one third of the population is still ill informed, grapple with problem of under nourishment, poverty, unemployment, ill health and a host of other problems; so the CSK and Pareto optimality have special importance to this country. These two concepts need special formulation, poor as we are; we habitually become passive as an economic group with low CSK abusion of a principle of pareto-optimality.P

Keywords: Kerton, Pareto, Developing Economies
Stream: Economics and Management
Presentation Type: Paper Presentation in English
Paper: A paper has not yet been submitted.

Prof. Bettadalli Chandrashekar

Professor and Director, JSS PG Centre, University of Mysore
Mysore, Karnataka, India

Robert R. Kerton, Professor of Economics, University of Waterloo has developed a concept, which has come to be known as Consumer Search Capital (CSK). Similarly, Vilfredo Pareto, an Italian economist, has developed the concept of efficiency in exchange as known as Pareto Optimality Analysis (POA). We know that a competitive market is efficient because it maximizes consumers’ interests and produces surplus. There is great hope for using these two concepts for our conditions in India to help make better consumer decisions and consumer welfare.c

Ref: I08P0965