Talk:Kaldor–Hicks efficiency

message: I dont use Wikipedia a lot, but on the Kaldor-Hicks page it said Pareto efficiency is impossible in most case. From what i know most exchanges are pareto efficient. please explain how you can say most exchange are inefficeint? why would anyone make an inefficient exchage? by definition if you exchange something its becuase you think you will get at least as much utility, which is pareto efficient.  (p.s. i edited the main page, becuase thats what wikipedia is about...right?)
Regarding the previous paragraph: I removed the stuff you added about most changes being Pareto efficient and weakened the claim about the impossibility of making changes anyway, adding "some believe" and "large changes such as economic policy changes." Kg6cvv 21:43, 20 June 2006 (UTC)
replies: text: Like the general direction the changes are going in, but now the order is screwed up. I think Pareto should go first and then be contrasted with K-H so I'm changing that again 86.80.156.143 13:54, 23 June 2006 (UTC)
thread_title:  Untitled 

message: I think the article's use of "efficient" vs. "more efficient" and the like is extremely sloppy.   Sometimes Kaldor-Hicks improvements are referred to as Kaldor-Hicks efficient, and the same is true of the discussion of Pareto.  This is confusing because the article (correctly) notes that all Kaldor-Hicks efficient worldstates are Pareto-efficient worldstates, so it sounds like Kaldor-Hicks and Pareto are the same thing.  What makes Kaldor-Hicks different from Pareto is that not all Kaldor-Hicks improvements are Pareto improvements.  So I think the article needs to be rewritten to make it clear when it is  talking about efficiency improvements (which need not lead to an outcome that is efficient, only one that is "more efficient") and when it is talking about actual efficiency (in which case Kaldor-Hicks and Pareto are the same).  Elliotreed 19:07, 13 January 2007 (UTC)
thread_title:  Improvements vs. efficiency 

message: I agree that there is a need for rewriting. 
Any situation where a Kaldor-Hicks improvement is not possible is automatically Pareto efficient because a Pareto efficient situation is a situation where no Pareto improvement is possible and the set of possible Pareto improvements is always a subset of the set of possible Kaldor-Hicks improvements. Also, except in more exotic and, typically, specially constructed examples, it will tend to be true that a Pareto efficient situation will not provide opportunities for a Kaldor-Hicks improvement. 
Hence, the Kaldor-Hicks efficiency concept is somewhat redundant, although can be mentioned, as it contributes very little in comparison with the concept of Pareto efficiency (as a Kaldor-Hicks efficient situation is Pareto efficient). Strictly speaking, the Kaldor-Hicks set of efficient possibilities (in a set of possibilities) will be a subset of the set of Pareto efficient possibilities. In practice, without it being an exotic example, the two sets will be the same. 
Therefore, I suggest that the title should be changed to ‘Kaldor-Hicks criterion’ as the substance of the idea is the existence of Kaldor-Hicks improvements that are not Pareto improvements. This expands the scope of what sort of changes can be considered as 'generally' welfare improving. The rationale is that there are lots of changes that raise income on average although each one may make some worse off and others better off, however, with any luck the accumulation of such changes will tend to cancel out in terms of their redistributive effect and therefore everyone will end up better off (a Pareto improvement). In practice, the accumulation of changes doesn't necessarily cancel out in terms of redistribution, but adverse changes to income distribution, it is argued, can still be addressed by other policy measures. [Feel free to use or modify any of this text.] 
I also suggest that a more relevant text is found as the reference for this welfare criterion. Although I haven't read this particular book of Posner, and Posner is well worth reading, his focus in the book would not be on the basics of welfare criteria, hence, a good reference text on welfare economics should be used. I suggest getting hold of: Welfare Economics and Social Choice Theory (2nd Ed) by Allan M. Feldman, and Roberto Serrano
--203.214.15.223 (talk) 19:29, 29 March 2008 (UTC)
thread_title:  Improvements vs efficiency and a name change suggestion 

message: The article states that: "The combined Kaldor–Hicks criterion does not have this problem, but it can be non-transitive (A may be an improvement over B, and B over C, but A may not be an improvement over C)." However, the source for this claim (http://cepa.newschool.edu/het/essays/paretian/paretosocial.htm#scitovsky) goes to a page with a 404 error.
Further, this explanation is rather lacking, since the simplest explanation of Kaldor-Hicks efficiency usually ignores utility functions in favor of measuring benefits in terms of currency. E.g. "A city should build an airport that costs $1 billion if it would generate profits of $2 billion for the city's businesses and airlines" (This also ignores the timing of the cash flows, but that's irrelevant for the example). If this was the correct usage of the Kaldor-Hicks criterion, then it would be transitive.
However, the criteria deals with utility functions, not costs and profits. Implicitly, these types of examples are assuming constant utility functions, which is unrealistic. A more thorough explanation of the intrasitivity of the Kaldor-Hicks criterion is found here (https://books.google.com/books?id=XghCBAAAQBAJ&lpg=PA604&ots=2AIUiTJZRK&dq=Kaldor%E2%80%93Hicks%20criteria%20intransitve&pg=PA604#v=onepage&q=Kaldor%E2%80%93Hicks%20criteria%20intransitve&f=false):
"the Kaldor-Hicks criterion is not necessarily an intransitive decision rule. The argument is that if the utility feasible curves for individuals intersect, it may be the case that B is preferred to A (accoring to the Kaldor-Hicks criterion), and C is preferred to B, while A is preferred to C. This can happen when the proposed projects are large and introduces significant income redistribution."
This is relatively short, but provides a clear explanation of in what situaitons and why the criterion can display nontransitivity.  — Preceding unsigned comment added by 71.228.220.15 (talk) 21:05, 13 March 2015 (UTC)
thread_title:  Further expansion of nontransitivity of Kaldor-Hicks criterion 

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thread_title:  External links modified