On a Fallacy in the Kaldor-Hicks Efficiency-Equity Analysis
13 Pages Posted: 23 Mar 2014 Last revised: 10 May 2014
Date Written: 2013
This paper shows that implicit assumptions about the numeraire good in the Kaldor-Hicks efficiency-equity analysis involve a "same-yardstick" fallacy (a fallacy pointed out by Paul Samuelson in another context). These results have negative implications for cost-benefit analysis, the wealth-maximization approach to law and economics, and other parts of applied welfare economics -- as well as for the whole vision of economics based on the "production and distribution of social wealth."
Keywords: Kaldor-Hicks criterion, wealth maximization, efficiency, equity, law and economics, cost-benefit analysis
JEL Classification: D6, K
Suggested Citation: Suggested Citation