Evaluating public goods from individual welfare functions

This paper suggests a method for evaluating public goods based directly on individual welfare functions. A hypothetical project for reducing air pollution is used as an illustration. The paper describes a technique for estimating welfare functions: the approach is applied to a limited experimental sample. The individual marginal rates of substitution between air income are then added up in order to yield estimates of values associated with air quality variations by the group under consideration. Further it is illustrated that the utilization in the aggregation process of heights based on individual differences in marginal utility of income as computed from the welfare functions, can modify the measures of social profitability and yield evaluation more consistent with basis criteria of social welfare.