Kaldor-Hicks Petitio Principii Fallacy

This paper shows that implicit assumptions about the numeraire good in the Kaldor–Hicks efficiency–equity analysis involve a ‘‘same-yardstick’’ fallacy (a fallacy pointed out by Paul Samuelson in another context), a special case of the Petitio Principii fallacy. These results have negative implications for cost-benefit analysis, the wealth-maximization approach to law and economics, and other parts of applied welfare economics—as well as for the whole vision of economics based on the ‘‘production and distribution of social wealth’’.

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