PP Presentation

• In the specific context of benefit/cost analysis, efficiency refers to the extent to which a particular policy improves upon status-quo social utility as measured by net (monetary) benefits.

• If there are a range of possible policy options, then the efficient policy option is the one that generates the greatest improvement in social utility relative to the status quo.

• There are two different criteria for judging this conception of efficiency: the Kaldor-Hicks criterion and Pareto-efficiency.

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