The Kaldor-Hicks efficiency criterion is a test in welfare economics against which hypothetical policies are often measured- click here for the Wikipedia article. We've clashed horns with it many times on this blog. Here is another demonstration of the absurdity of the Kaldor-Hicks criterion: it implies that we should abolish all transfer programs. Perhaps you … Continue reading The Kaldor-Hicks efficiency criterion and transfer programs
I. The Easterlin paradox is the observation that country level happiness does not seem to increase overtime with income- even though there are many reasons to think it should- for example, income gives us choices, security, additional consumption and so on. The paradox grows even weirder when we reflect that individual increases in income do … Continue reading Why we can’t (usefully) dismiss concern about the income of others as envious
I. Plausibly there are actually two problems of interpersonal utility comparison- the epistemic problem and the ontological problem. The epistemic problem is the problem of how we could know that a given comparison is correct. The ontological problem is the problem of why we should think such comparisons are meaningful- anymore than measuring temperature against … Continue reading [WIP] [Technical] Extending the veil of ignorance argument for utilitarianism into an argument for ‘egalitarian’ interpersonal utility comparison
[EDIT. I am no longer satisfied with my treatment of Ng's argument. It is perhaps not wrong as such, but it is like taking a 2 dimensional slice of a three dimensional object. I have ignored much of what is subtle and interesting in his take. I will leave this essay up though for two … Continue reading A dollar is a dollar? What economists don’t get about indirect programs
Definition of a Kaldor-Hicks improvement & efficiency The notion of a Kaldor-Hicks improvement is a way of evaluating policies. As we shall see, it is a very bad one. A change is a Kaldor-Hicks improvement if and only if: A) It is a Pareto improvement (at least one party wins and no parties lose) OR … Continue reading Against Kaldor-Hicks, or an ethical weight of zero on distributional concerns is still an ethical weight.
I. Gross domestic product can be calculated in many ways, but one of the most common is: (Government expenditure)+(Consumption)+(Investment)+((Exports)-(Imports)) To see why government expenditure is under-counted consider two countries, one of which provides all of its health care through the public sector, the other through the private sector. In the latter case, health care is … Continue reading GDP undervalues government services
You occasionally see arguments that, while CEO's are spectacularly rich, those riches are drop in the ocean compared to the quantum that would be required to give a real pay rise to workers. Of course the main reply here is that CEO's are emblematic of a whole bunch of people who are overpaid relative to … Continue reading Jeff Beezos absolutely could afford to pay his employees much better