The problem with which this investigation is concerned is that of ascertaining whether or not A. C. Pigou led to the development of a modern school of Welfare Economics. This study has a threefold purpose. The first is to examine the welfare criterion of the classical tradition. The second is to examine the welfare criterion of the neoclassical tradition. The third is to develop a synthesis of classical and neoclassical into a modern welfare criterion. This study concludes that A. C. Pigou has founded a modern school of Welfare Economics. Pigou accomplished this by synthesizing the welfare doctrines of the classical tradition with that of the neoclassical tradition.

The thesis analyzes the validity of consumer's surplus as a measure of welfare change. The analysis begins by examining the chronological development of the concept. Once an understanding of consumer's surplus is formulated, an evaluation of its use in modern ad hoc problems can be undertaken. Chapter II and III discuss the development of consumer's surplus from Classical economics to its modern reformulations, The concept's application to different problems is discussed in Chapter IV. Chapter V and VI deal with the intergration of consumer's surplus and the compensation principle. The primary conclusion is that the Laspeyres measure, in combination with the compensation test, provides a definitive measure of welfare change in a limited situation.