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ABSTRACT
This paper offers a history of the ‘Kaldor-Hicks’ concept of economic efficiency from its European birth in the 1930s to its American resurgence in the 1970s to its widespread implementation in the Global South by the early twenty-first century. While philosophers, economists and legal theorists have written widely about Kaldor-Hicks – global-minded intellectual historians have not. As a result, scholars have yet to place its creation, dissemination and ascendency into a broader historical context or examine the reasons behind its global spread. As this paper will demonstrate through the rise of cost–benefit analyses based on ‘willingness to pay’ metrics, while Kaldor-Hicks efficiency was invented by neoclassical economists in the late 1930s, its ascent to policy dominance is part-and-parcel of the neoliberal revolution of the past half century. Linking the history of economic thought with the rise of global neoliberalism, this paper demonstrates how Kaldor-Hicks efficiency emerged as a central pillar of a new, interventionist, wealth-maximizing and market-based form of depoliticized technocratic governance that not only marginalizes distributive concerns but actively exacerbates the problem of global inequality.
Acknowledgements
Early versions of this paper were presented at the Conversations on New Histories of Capitalism lecture series at the European University Institute in Florence, Italy as well at the Online Symposium ‘Towards a Global Intellectual History of an Unequal World,’ at Aarhus University in Aarhus, Denmark. I would like to thank the audience for their helpful comments as well as the anonymous readers for Global Intellectual History and Yam Maayan.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 Lovejoy and Reid, “Forests,” New York Times, April 19th, 2018.
2 Walker, “John Reid: Teaching Ecologists,” https://www.ecosystemmarketplace.com/articles/john-reid-teaching-ecologists-the-economics-of-nature/.
3 Cordero, “Distributional Analysis,” 279–93.
4 Ibid., 280, 287–9.
5 Ibid., 280.
6 Mary Finley-Brook and Curtis Thomas, “Displaced Indigenous Populations,” 269–90.
7 Morales cited in Schneider, “Panama’s Hydropower Development.” Circle of Blue, February 13th, 2015, https://www.circleofblue.org/2015/world/panamas-hydropower-development-defined-fierce-resistance-tough-choices/.
8 Weiner, “Diffusion of Regulatory Oversight,” 123.
9 Renda, “RIA World,” 127.
10 See endnote 42 for the legal and philosophical literature on Kaldor-Hicks. For a rare analysis of Kaldor-Hicks by a leading intellectual historian see Rodgers, Age of Fracture, 57–63. See also Persky, “Cost-Benefit Analysis.”
11 Slobodian, Globalists; Brown, Undoing the Demos.
12 For the rise of such modes of thought in the American context see Berman, Thinking. This paper focuses on cost-benefit analyses. For how Kaldor-Hicks was used to legitimise unequal free trade see Antras et al., “Globalization, Inequality and Welfare,” 388–91.
13 For an overview critique of Kaldor-Hicks see Adler and Posner, “Rethinking.”
14 Keynes, General Theory, ch. 24.
15 Intellectual histories that have examined how neoclassical economic theories shape the world include Burgin, Great Persuasion; Mirowski and Plehwe, Mont Pelerin.
16 Some global works of history that have traced the intellectual origins of neoliberal policies include Mitchell, “How Neoliberalism Makes its World”; Valdes, Pinochet’s Economists; Bair, “Taking Aim”; Chwieroth, Capital Ideas; Prashad, Poorer Nations; Kaur, Brand New Nation; Ban, Ruling Ideas. Sociologists have also examined the role of Western ideas in the rise of global neoliberalism, see Kentikelenes and Babb, “Neoliberal Globalization.”
17 For general overview of the rise of neoclassical economics see Dobb, Theories of Value; Mirowski, More Heat; Colander, History of Economic Thought; Morgan, Neoclassical Economics?
18 Pigou, Economics of Welfare, 89; Atkinson, “Ethics behind Inequality,” 209–34. See also Bevir, “Sidney Webb”.
19 Cook, “Historicizing Piketty,” 35–57; Robbins, “Interpersonal Comparison,” 640–1. See also Cooter and Rappaport, “Were Ordinalists Wrong?”
20 On the importance of denying the possibility of comparing utilities to the conservative political project see Wonnell, “Efficiency and Conservatism.”
21 Ibid., 50–7.
22 Harrod: “Scope and Method,” 397.
23 Kaldor, “Welfare Propositions,” 549–52.
24 Hicks, “Foundations,” 697.
25 Hicks, “Foundations,” 711.
26 On neoliberal harm see DeMartino, “Harming Irreparably,” 315–40.
27 Hicks, “Foundations,” 710; See also Hicks, “Rehabilitation,” 108–16.
28 For critique of WTP see Heinzerling and Ackerman, “Wasting Away in Paretoville,” 363–70; Renda, “RIA World,” 134.
29 Little, Welfare Economics, 90.
30 Mishan “Survey of Welfare Economics,” 225.
31 Yarborough qtd in Applebaum, Economist’s Hour, chapter 7.
32 United States Senate, “Evaluation of Techniques,” 95.
33 Ibid., 16.
34 Ibid., 132, 15.
35 See Adler, “Distributional Weights,” 264–85.
36 U.S. OMB, Regulatory Program, 39; Smith, Environmental Policy
37 Robinson, Hammitt and Zeckhauser, “Role of Distribution.” See also Fullerton, “Six Distributional Effects”.
38 Gilens and Page, “Testing Theories,” 564–81. On such depoliticizing technocracy see Streek, Buying Time.
39 Posner, Economic Analysis, 11–12.
40 Ibid., 15; 4.
41 Ibid., 11.
42 These papers later appeared as articles in volume 8 of the Hofstra Law Review and volume 9 of the Journal of Legal Studies in 1980. They include scathing critiques of Kaldor-Hicks by the likes of Ronald Dworkin, Morton Horwitz, Jules Coleman, Duncan Kennedy, Richard Epstein, LA Bebchuck, Mario Rizzo, and more. For overview of critical legal studies critique of Law-and-Economics see Kennedy, “Law-and-Economics,” 464–73.
43 On the influence of Law-and-Economics movement see Ash et al. “Ideas Have Consequences.”
44 See Renda, “RIA World,” 46–64.
45 De Francesco, “Diffusion”; Livermore, “Cost-Benefit Analysis,” 146–93.
46 For such guides see European Commission, Guide to Cost−Benefit Analysis.
47 These examples can be found here: IUCN Pakistan Program, “Cost-Benefit-Analysis” https://www.iucn.org/sites/dev/files/import/downloads/pk_macp_cba_draft_cs.pdf; USAID, “Indonesia mangrove,” https://www.climatelinks.org/sites/default/files/asset/document/2020_USAID_CEADIR-Indonesia-Mangrove-CBA-Revised.pdf; USAID, “Energy Regulartory Impact Assessment,” https://pdf.usaid.gov/pdf_docs/PA00TDF3.pdf.
48 Buncle, Natural Resource Management, 21–2.
49 Bandara and Tisdell, “Asian Elephant,” 93–107.
50 Kohlin, “Contingent valuation,” 237–58.
51 Truen, Regulatory Impact.
52 Ibid.