Appraisal:

In sum, disregarding  the problems inherent in the Kaldor, Hicks and Scitovsky criteria, the question must  be  raised  again: are these objective criteria make any sense? Ethically, of course, the Kaldor criteria is easily disputed as it is only a  "could" and not  a "would"  or  even  a  "should".  As  In  M.D.  Little writes, in his famous critique: "It  seems  improbable  that so  many  people  would,  in  England  now,  be prepared  to  say  that a change, which,  for  instance, made  the  rich so much richer  that they could  (hut  would not) overcompensate  the poor,  who were made poorer, would necessarily  increase the wealth of the community.  "

A point that has been reiterated by many contemporaries' economists such as, Baumol, Reder and Samuelson. However,  there were three lines of defense followed by  the advocates of the compensation principle. The first was to agree and make  the  "could"  into a "would",  i.e;  to  have  the winners actually compensate the  losers.  This, of course, leads to an improvement of sorts; the practical objection that arises is that once we are at a new allocation, winners are unlikely to surrender any of their gains.

The second defense, pursued by Hicks (1941),  was that even if the losers do not get compensated in the move, they might still benefit  in the "long-run"  if the criteria were followed consistently by the society. This argument is similar to that of "trickle-down"  theory and that support for free trade. Some people may be worse off in the short-run, but  in the long run, everyone will be better off. The underlying assumption, of course, is that  at  some point,  those who lost utility initially will come across a possible move in which they benefit and a society which  follows the Kaldorian rule will move to  it and thus they will gain  in  the end. Of course, as Little notes, this  is completely hypothetical. There is nothing to guarantee that there will eventually be a move in which the initial losers will be  the ultimate winners. The third  (and perhaps considered better)  line of defense  is  that  the Kaldor- Hicks criteria merely lay out what is economically  possible  and that  it  is up to policy-makers, on the basis  of their  own value judgments, to choose which move to make and whether compensation of  the losers should be forced. Thus, they argue,  they  are  merely  underlining that certain options may  be  more economically possible than others, but  they  are still only options. The  final decision will  require more philosophical, ethical and political considerations to be brought into the story.