Harming Irreparably: Economists, Neoliberalism, and the Matter of Kaldor-Hicks

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 induce substantial harm among many members of society. 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 (KH) compensation test, which provided the normative foundation for the neoliberal project. The paper finds that the best defense of KH, based on contractarianism, is deficient on grounds other than those commonly invoked against KH. The focus is on the welfarism that grounds the contractarian case, and the related presumption that all harms are reparable and, indeed, compensable.