On a Fallacy in the Kaldor-Hicks Efficiency-Equity Analysis

Constitutional Political Economy 25 (2):125-136 (2014)
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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."

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David Ellerman
University of Ljubljana


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