Kaldor–Hicks efficiency

A Kaldor–Hicks improvement is an economic re-allocation of resources among people that captures some of the intuitive appeal of a Pareto improvement, but has less stringent criteria and is hence applicable to more circumstances. A re-allocation is a Kaldor–Hicks improvement if those that are made better off could hypothetically compensate those that are made worse off and lead to a Pareto-improving outcome. The compensation does not actually have to occur (there is no presumption in favor of status-quo) and thus, a Kaldor–Hicks improvement can in fact leave some people worse off.

This article is issued from Wikipedia. The text is available under Creative Commons Attribution-Share Alike 4.0 unless otherwise noted. Additional terms may apply for the media files.