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On a fallacy in the Kaldor–Hicks efficiency–equity analysis

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  • David Ellerman

Abstract

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”. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • David Ellerman, 2014. "On a fallacy in the Kaldor–Hicks efficiency–equity analysis," Constitutional Political Economy, Springer, vol. 25(2), pages 125-136, June.
    • Handle: RePEc:kap:copoec:v:25:y:2014:i:2:p:125-136
    DOI: 10.1007/s10602-014-9159-x
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    References listed on IDEAS

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    3. Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-597, September.
    4. J. R. Hicks, 1941. "The Rehabilitation of Consumers' Surplus," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 8(2), pages 108-116.
    5. Harberger, Arnold C, 1971. "Three Basic Postulates for Applied Welfare Economics: An Interpretive Essay," Journal of Economic Literature, American Economic Association, vol. 9(3), pages 785-797, September.
    6. Hicks, John R, 1975. "The Scope and Status of Welfare Economics," Oxford Economic Papers, Oxford University Press, vol. 27(3), pages 307-326, November.
    7. Charles Blackorby & David Donaldson, 1990. "A Review Article: The Case against the Use of the Sum of Compensating Variations in Cost-Benefit Analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 23(3), pages 471-494, August.
    8. David Ellerman, 2014. "On Property Theory," Journal of Economic Issues, Taylor & Francis Journals, vol. 48(3), pages 601-624.
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    More about this item

    Keywords

    Kaldor–Hicks criterion; Wealth maximization; Efficiency; Equity; Law and economics; Cost-benefit analysis; D6; K;
    All these keywords.

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics

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