# Numeraire Illusion: The Final Demise of the Kaldor-Hicks Principle David Ellerman

Yüklə 156,5 Kb.
 tarix 01.08.2018 ölçüsü 156,5 Kb. #60174

• ## How much would a dollar buy in 1900?

• Answer: A dollar’s worth of goods.
• ## How much would a dollar buy in 2000?

• Answer: A dollar’s worth of goods.

• ## What’s an apple worth to John?

• In terms of apples as numeraire, the value of an apple to John is exactly one.
• ## What’s an apple worth to Mary?

• Similarly, the value of an apple to Mary is exactly one.

• ## Every system of measurement-relative-to-a-base has an informational “blind spot” at the base:

• Location of the origin relative to the origin is always 0
• Value of the numeraire relative to the numeraire is always 1.

• ## Kaldor-Hicks criterion:

• = \$gains exceeds \$losses
• = net increase in pie
• = potential Pareto improvement.
• Change is “increase in efficiency”
• ## There is compensation \$C such that \$gains > \$C > \$losses so “change + compensation” = actual Pareto improvement.

• Change = “efficiency” part
• Compensation = “equity” part.

• ## Cost-Benefit Analysis:

• Change = “Project” (e.g., “project evaluation”)
• Might do if project \$gains exceed \$losses
• Actual compensation is controversial separate question.
• ## Wealth Maximization (“Chicago”) School of Law and Economics:

• Change = “legal change”
• Increase in efficiency if \$gains – \$losses = net change in social wealth is positive.
• Compensation is again a separate question usually considered not feasible.

• ## The production-distribution school (MPKH+) is based on parsing a resource reallocation—into two parts:

• “Production” or efficiency part that changes the size of the social pie, and
• “Distribution” or equity part that does not change the size of the social pie.

• ## \$ = change in dollar pie > 0 (\$ = numeraire)

• But d\$ = “Compensation” makes no change in \$ pie;

• ## N = change in nut pie > 0 (nuts = numeraire)

• Where both dA and d\$ contribute to the nut pie.

## Reversed numeraires + 3rd numeraire

Yüklə 156,5 Kb.

Dostları ilə paylaş:

Verilənlər bazası müəlliflik hüququ ilə müdafiə olunur ©genderi.org 2023
rəhbərliyinə müraciət

Ana səhifə