Suppose policy A will only affect the welfare of 5 people. Look at the table below individual WTP for A WTAC for A UI A WNA $3,000 $1,000 OO OOO $ 600 500 $ 1,000 The economist would argue that the policy A be adopted because WTP is greater than WTAC. This recommendation is based on what's known as compensation principle Suppose we do this. We take some money from a "rich" person, say $2,000 a year. We give all that money to a "poor" person. Could we justify this tax and transfer using the principle that Kaldor discussed? --30-- Why? --31