Ah good, I didn’t misunderstand that then. I’m still confused as to why there are not 5 different Kaldor-Hicks improvement relations, one for each state of the economy, instead of just one. In the following passage in the post:
Using this kind of reasoning, one may confirm from the diagram that B is a Kaldor-Hicks improvement over A, C is a Kaldor-Hicks improvement over B, D is a Kaldor-Hicks improvement over C, but D is not a Kaldor-Hicks improvement over A.
B is a KHI over A in state b, but not in any other state. C is a KHI over B in state c, but not in any other state. As far as I can see, there in no economic state (and therefore no KHI relation) in which both B is a KHI over A and C is a KHI over B, and so the question of transitivity is irrelevant.
Ah good, I didn’t misunderstand that then. I’m still confused as to why there are not 5 different Kaldor-Hicks improvement relations, one for each state of the economy, instead of just one. In the following passage in the post:
B is a KHI over A in state b, but not in any other state. C is a KHI over B in state c, but not in any other state. As far as I can see, there in no economic state (and therefore no KHI relation) in which both B is a KHI over A and C is a KHI over B, and so the question of transitivity is irrelevant.