The Kaldor Hicks criterion (after Nicholas Kaldor and John Richard Hicks) designates an economic (economical) efficiency measure (called therefore also Kaldor Hicks efficiency). Afterwards a politics policy is meaningful, if it brings an improvement for at least one individual and the losers could be compensated by the winners. The compensation must be only theoretically possible, but not actually take place. If it actually took place, the measure would be even an improvement in the sense of Vilfredo Pareto (see Pareto efficiency).

An example for it: By trade the total production in everyone of the countries involved rises. The superproportional production increase of the respective export sector can accompany however with a production decrease of the respective import sector. By rearrangement of the additionally produced goods it would be nevertheless theoretically possible to place all involved ones better.

Literature

Hal R. Varian: Intermediate Microeconomics (6th OD. 2003), P. 15-16

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