----- Original Message ----- From: "Ken Hanly" <[EMAIL PROTECTED]>
> Forgot to paste this in last post..cheers, Ken Hanly > > I also wanted to ask if the same welfare critierion is used in trade theory? > > In sum, disregarding the problems inherent in the Kaldor, Hicks and > Scitovsky criteria, the question must be raised again: are these objective > criteria in any sense? Ethically, of course, the Kaldor criteria is easily > disputed as it is only a "could" and not a "would" or even a "should". As > Ian M.D. Little writes, in his famous critique: > > "It seems improbable that so many people would, in England now, be prepared > to say that a change, which, for instance, made the rich so much richer that > they could (but would not) overcompensate the poor, who were made poorer, > would necessarily increase the wealth of the community." (Little, 1950: > p.90). > > A point reiterated by many contemporaries (e.g. Baumol, 1946; Reder, 1947; > Samuelson, 1947). > > There were three lines of defense followed by the L.S.E. economists. The > first was to agree and make the "could" into a "would", i.e. have the > winners actually compensate the losers. This, of course, leads to an > improvements of sorts, the practical objection that arises is that once we > are at a new allocation, winners are unlikely to surrender any of their > gains. > > The second defense, pursued by Hicks (1941), was that even if the losers do > not get compensated in the move, they might still benefit in the "long-run" > if the criteria were followed consistently by society. This argument is > similar to that of "trickle-down" theory and in arguments for free trade: > some people may be worse off in the short-run, but in the long run, everyone > will be better off. The underlying assumption, of course, is that at > some point, those who lost utility initially will come across a possible > move in which they benefit and a society which follows the Kaldorian rule > will move to it and thus they will gain in the end. Of course, as Little > (1950) notes, this is completely hypothetical. There is nothing to > guarantee that there will eventually be a move in which the initial losers > will be the ultimate winners. > > The third (and perhaps best) line of defense is that the Kaldor-Hicks > criteria merely lay out what is economically possible and that it is up to > policy-makers, on the basis of their own value judgements, to choose which > move to make and whether compensation of the losers should be forced (cf. > Kaldor, 1939; Scitovsky, 1951). Thus, they argue, they are merely > underlining that certain options may be more economically possible than > others, but they are still only options. The final decision will require > more philosophical, ethical and political considerations to be brought into > the story. > ================ Be forced by whom? You mean we'll have to talk about power and such anachronisms as "what is the good" and the idea that efficiency and advantage are inseparable from ethics? :-) Don't count on *final* decisions. Oh, and what about bringing taxi drivers, medical assistants, ecologists, artists, engineers ...you know, the working class, into the discussion? Ian
