Zerbe and Bellas

Chapter 2

1. The Pareto Criterion

2. Kaldor-Hicks (KH) Criterion (potential Pareto criterion)

1. Willingness-to-pay (WTP) for gains and willingness-to-accept (WTA) for losses
2. An emphasis on efficiency
3. Constant marginal utility of income
4. Inclusion of non-pecuniary effects
5. Omission of moral sentiments
6. Market failure justifies BCA
7. Transactions costs are zero
8. The role of BCA provides a recommendation
9. Wealth maximization is consistent with BCA

3. Kaldor-Hicks Moral (KHM) Criterion (differences)

1. Recognizes the legal status quo (i.e., existing property rights)
2. Excludes illegal or immoral gains or losses
3. Includes moral sentiments
4. Does not rely on market failure to justify BCA
5. The role of BCA is to provide information

4. Criticisms of KH

1. Absence of scientific method of aggregating preferences
2. Results will reflect the existing distribution of wealth
3. Reliance on market values
4. Status quo bias
5. Results will reflect the existing income distribution
6. Moral values are neglected
7. Failure to pass the PCT
8. BCA does not exclude bad utility
9. Failure to consider transactions costs
10. BCA is inferior to voting
11. The use of private values when public values are appropriate
12. BCA may neglect non-quantitative values
13. Discussion is better than BCA