Household Equivalence Scales and Interpersonal Comparisons

Recent papers have used household equivalence scales to construct measures of welfare inequality. This procedure rests on an often implicit value judgement, namely, that if, after adjustment for demographic characteristics, two households are on the same indifference curve, they are equally well off. That value judgement is not compelling, and there are situations in which it is ethically repugnant. This is particularly likely if tastes are functions of past experience and income.