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

Ellerman, David, On a Fallacy in the Kaldor-Hicks Efficiency-Equity Analysis (2013). Constitutional Political Economy, Vol. 25, No. 2, June 2014, Available at SSRN: https://ssrn.com/abstract=2412758

David Ellerman (Contact Author)

University of Ljubljana ( email )

School of Social Science
Ljubljana, CA

HOME PAGE: http://www.ellerman.org

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