Abstarct: Welfare economics is concerned with the evaluation of alternative economic situations from the point of view of the society’s well-being (welfare). However, ability to measure the welfare of the society remains a greater challenge to economists. Therefore, amongst several attempts made by economists to construct tool for measuring social welfare is Kaldor-Hicks criterion. A Kaldor–Hicks criterion, named after the originators, Nicholas Kaldor and John Hicks, is a tool of measurement of economic re-allocation of resources among people that captures some of the intuitive appeal of a Pareto effeciency, but has less stringent criteria and is hence applicable to more circumstances. It claims that in certain circumstances, it is possible to change available rules for obtaining more economic benefit and efficiency, while this change may create loss to some specific groups. Kaldor-Hicks criterion is used as a tool for decision making. In this regard, Kaldor-Hicks criterion is observed as basis for making some social-economic decisions. However, applying this criterion has other consequences as well that attracts critical attention. Therefore, this article attempts to evaluate these critiques with respect to its assumptions and convenience of its application to social-economic issues by the decision makers.
Keywords: Kaldor-Hicks compensation criterion, social welfare, possibility curve.
Title: KALDOR-HICKS COMPENSATION CRITERION: A MEASURE OF SOCIAL WELFARE
Author: P.O Idisi, I. J Ogwu, M. N. Zorto
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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