Question

Say we have a policy that will create winners and losers. The principle that economists use to determine if that policy should be adopted says this: ----

	if there are more winners than losers the policy should be adopted
	if the winners are able to compensate the losers the policy should be adopted
	if the welfare gains of the winners are more important to society than the welfare losses of the losers, the policy should be adopted
	all of these principles can be used, it depends on the specific situation

Answer 1

All these criteria can be used to decide regarding the public policy.

This is because public policies can be adopted through all the given criteria. The first option highlights the welfare inabsolte terms. The second option is given in Kaldor Hicks criteria. It says that a policy can be adopted even if it creates net loss to the society. This is done when the winners are able to compensate the losers. The third option highlights the net walfare of the policy to the society. This is calculated by subtracting total cost from total benefit.

Thus, all the criteria can be used.