Harming Irreparably: On Neoliberalism, Kaldor-Hicks, and the Paretian Guarantee
The global neoliberal project, which entailed inter alia financial liberalization that accelerated financialization of the world economy, was advocated by leading Austrian, Chicago School neoclassical, and New Keynesian economists, despite awareness that the project would harm many members of society even as it benefitted others. To the extent that they were efficacious in their advocacy, economists contributed to the imposition of serious harm. Often the harm befell the most vulnerable members of society. At least some of the harm was avoidable. This paper examines critically the Kaldor-Hicks compensation test, a primary criterion used in defense of the neoliberal project. The paper finds that the best existing defense of Kaldor-Hicks is Paretian rather than Benthamian in nature: it focuses on the long-run rather than on each individual policy innovation, and claims that all agents benefit by a series of Kaldor-Hicks consistent innovations even if some are harmed in each individual instance. The paper finds that the Paretian case is deficient on grounds other than those commonly invoked against Kaldor-Hicks. The critique focuses on the neoclassical consequentialist welfarism that grounds the Paretian case, and the related presumption that all harms are reparable and, indeed, compensable.