Skip to main content Accessibility help
×
Home
Hostname: page-component-684899dbb8-ct24h Total loading time: 0.456 Render date: 2022-05-26T12:17:14.924Z Has data issue: true Feature Flags: { "shouldUseShareProductTool": true, "shouldUseHypothesis": true, "isUnsiloEnabled": true, "useRatesEcommerce": false, "useNewApi": true }

6 - Numeraire Illusion: The Final Demise of the Kaldor–Hicks Principle

Published online by Cambridge University Press:  06 July 2009

Mark D. White
Affiliation:
City University of New York
Get access

Summary

INTRODUCTION: PARETO VERSUS MARSHALL–PIGOU–KALDOR–HICKS

The Paretian revolution in normative economics established the possibility of defining efficiency (i.e., Pareto optimality, wherein no one can be made better off without making someone else worse off) without using interpersonal comparisons of utility or preferences. This treatment of efficiency is often seen as a weak form of a utilitarian or welfarist theory, that is, as a necessary condition for a maximum of “social welfare.” But the notion of Pareto efficiency can also be seen as part of a rights-based approach to normative economics that takes seriously the differences between persons and that accordingly eschews any given social scalar (“social welfare”) that morally ought to be maximized. Without any such scalar quantity to be maximized, the Paretian conditions are the necessary conditions for a vector maximization of the individual welfares.

The older Marshall–Pigou tradition in the economics of welfare was based on a fundamental distinction between the size and the distribution of the “social pie,” for example, Pigou's “production” versus “distribution” of the “national dividend.” This social pie was not to be identified with overall welfare (e.g., Pigou's “economic welfare”), because the quantity of overall welfare could be affected by both the size and the distribution of the pie (e.g., Pigou's “national dividend”). The pie that economists would be professionally concerned with maximizing is an intermediate aggregate expressed in the measure of money and variously known as the national dividend (or product), net social benefits (e.g., in cost–benefit analysis), or social wealth (e.g. in the law-and-economics literature).

Type
Chapter
Information
Publisher: Cambridge University Press
Print publication year: 2008

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ellerman, David, 1992, Property and Contract in Economics, Cambridge, MA: BlackwellGoogle Scholar
Ellerman, David, 2004, “The Market Mechanism of Appropriation,” Journal des Economistes et des Etudes Humaines, 14, pp. 35–53CrossRefGoogle Scholar
Pigou, Arthur C., 1960, The Economics of Welfare, 4th ed., London: MacmillanGoogle Scholar
Kaldor, Nicholas, 1939, “Welfare Propositions of Economics and Interpersonal Comparisons of Utility,” Economic Journal, 49, pp. 549–552CrossRefGoogle Scholar
Hicks, John R., 1939, “The Foundations of Welfare Economics,” Economic Journal, 49, pp. 696–712CrossRefGoogle Scholar
Mishan, E. J., 1964, Welfare Economics: Five Introductory Essays, New York: Random HouseGoogle Scholar
Chipman, John S. and Moore, John C., 1978, “The New Welfare Economics 1939–1974,” International Economic Review, 19, pp. 547–584CrossRefGoogle Scholar
Adler, Matthew D. and Posner, Eric A., eds., 2001, Cost–Benefit Analysis: Legal, Economic, and Philosophical Perspectives, Chicago: University of Chicago Press
Marshall, Alfred, 1961, Principles of Economics, 9th ed., London: MacmillanGoogle Scholar
Posner, Richard, 2001, “Cost–Benefit Analysis: Definition, Justification, and Comment on Conference Papers,” in Adler and Posner, Cost–Benefit Analysis, p. 317Google Scholar
Stokey, Edith and Zeckhauser, Richard J., 1978, A Primer for Policy Analysis, New York: W.W. NortonGoogle Scholar
Just, Richard E., Hueth, Darrel L., and Schmitz, Andrew, 1982, Applied Welfare Economics and Public Policy, Englewood Cliffs, NJ: Prentice-HallGoogle Scholar
Samuelson, Paul A., 1979, “Complementarity: An Essay on the 40th Anniversary of the Hicks–Allen Revolution in Demand Theory,” Journal of Economic Literature, 12, p. 1264Google Scholar
Hicks, John R., 1975, “The Scope and Status of Welfare Economics,” Oxford Economic Papers, 27, pp. 307–26CrossRefGoogle Scholar
Scitovsky, Tibor, 1941, “A Note on Welfare Propositions in Economics,” Review of Economic Studies, 9, pp. 77–88CrossRefGoogle Scholar
Harberger, Arnold C., 1971, “Three Basic Postulates for Applied Welfare Economics: An Interpretive Essay,” Journal of Economic Literature, 9, pp. 785–97Google Scholar
Boadway, Robin W. and Bruce, Neil, 1984, Welfare Economics, Oxford: Basil BlackwellGoogle Scholar
Blackorby, Charles and Donaldson, David, 1990, “A Review Article: The Case against the Use of the Sum of Compensating Variations in Cost–Benefit Analysis,” Canadian Journal of Economics, 23, pp. 471–94CrossRefGoogle Scholar
Boadway, Robin W., 2000, The Economic Evaluation of Projects, Kingston, Canada: Queen's University, p. 30Google Scholar
Friedman, David D., 2000, Law's Order: What Economics Has to Do with Law and Why It Matters, Princeton: Princeton University Press, p. 20Google Scholar
Coase, Ronald H., 1960, “The Problem of Social Cost,” Journal of Law and Economics, 3, pp. 1–44CrossRefGoogle Scholar
Ellerman, Denny et al., 2000, Markets for Clean Air: The U.S. Acid Rain Program, New York: Cambridge University PressCrossRefGoogle Scholar
Kuperberg, Mark and Beitz, Charles, eds., 1983, Law, Economics, and Philosophy, Totowa, NJ: Rowman and Allanheld
Buchanan, James M., 1999, The Logical Foundations of Constitutional Liberty: The Collected Works of James M. Buchanan, vol. 1, Indianapolis: Liberty FundGoogle Scholar
2
Cited by

Save book to Kindle

To save this book to your Kindle, first ensure coreplatform@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×