Kaldor-Hicks Improvement
Updated 2026-07-31
INTRODUCTION
English translation pending.
CORE DEFINITION
Proposed by Nicholas Kaldor and John Hicks, this criterion relaxes the Pareto standard. A change is efficient if the gainers' gains are large enough in principle to compensate the losers, even when no compensation occurs in practice. The test is whether total surplus rises, not whether anyone is left worse off, which is why it can justify reforms that create visible losers.
SCAFFOLDING EFFECT
Reduce cognitive load
- Reform justification: explain why a change with casualties can still count as progress. - Surplus accounting: quantify winners' gains and losers' losses and compare the totals. - Compensation debate: separate the efficiency question from the fairness question of who gets paid.
Anchor fast decisions
Because a change can raise total welfare while harming some individuals, the Pareto standard blocks nearly every real policy move. Allowing hypothetical compensation clears that blockage by testing only the size of the total gain. The risk follows directly: because payment is optional, the criterion can bless changes whose losses fall on people with little political power.
MINIMUM ACTION
In progress 0/4Practice this model in one real situation:
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Source support: Explicit
- en.wikipedia.orghttps://en.wikipedia.org/wiki/Kaldor%E2%80%93Hicks_efficiencyverified
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