IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v122y2014i3p439-444.html
   My bibliography  Save this article

Reconciling the Rawlsian and the utilitarian approaches to the maximization of social welfare

Author

Listed:
  • Stark, Oded
  • Jakubek, Marcin
  • Falniowski, Fryderyk

Abstract

Under a deadweight loss of tax and transfer, there is tension between the optimal policy choices of a Rawlsian social planner and a utilitarian social planner. However, when with a weight greater than a certain critical value the individuals’ utility functions incorporate distaste for low relative income, a utilitarian will select exactly the same income distribution as a Rawlsian.

Suggested Citation

  • Stark, Oded & Jakubek, Marcin & Falniowski, Fryderyk, 2014. "Reconciling the Rawlsian and the utilitarian approaches to the maximization of social welfare," Economics Letters, Elsevier, vol. 122(3), pages 439-444.
    • Handle: RePEc:eee:ecolet:v:122:y:2014:i:3:p:439-444
    DOI: 10.1016/j.econlet.2013.11.019
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176513005132
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2013.11.019?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Stark, Oded & Fan, C. Simon, 2011. "Migration for degrading work as an escape from humiliation," Journal of Economic Behavior & Organization, Elsevier, vol. 77(3), pages 241-247, March.
    2. Frank, Robert H, 1985. "The Demand for Unobservable and Other Nonpositional Goods," American Economic Review, American Economic Association, vol. 75(1), pages 101-116, March.
    3. Michael J. Boskin & Eytan Sheshinski, 1978. "Optimal Redistributive Taxation When Individual Welfare Depends upon Relative Income," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 92(4), pages 589-601.
    4. Oded Stark & Walter Hyll & Yong Wang, 2012. "Endogenous Selection of Comparison Groups, Human Capital Formation, and Tax Policy," Economica, London School of Economics and Political Science, vol. 79(313), pages 62-75, January.
    5. David Card & Alexandre Mas & Enrico Moretti & Emmanuel Saez, 2012. "Inequality at Work: The Effect of Peer Salaries on Job Satisfaction," American Economic Review, American Economic Association, vol. 102(6), pages 2981-3003, October.
    6. Antonio Cabrales & Olivier Gossner & Roberto Serrano, 2013. "Entropy and the Value of Information for Investors," American Economic Review, American Economic Association, vol. 103(1), pages 360-377, February.
    7. Oded Stark & Walter Hyll, 2011. "On the Economic Architecture of the Workplace: Repercussions of Social Comparisons among Heterogeneous Workers," Journal of Labor Economics, University of Chicago Press, vol. 29(2), pages 349-375.
    8. Blanchflower, David G. & Oswald, Andrew J., 2008. "Hypertension and happiness across nations," Journal of Health Economics, Elsevier, vol. 27(2), pages 218-233, March.
    9. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 963-1002.
    10. Stark, Oded & Taylor, J Edward, 1991. "Migration Incentives, Migration Types: The Role of Relative Deprivation," Economic Journal, Royal Economic Society, vol. 101(408), pages 1163-1178, September.
    11. Yaari, Menahem E., 1981. "Rawls, edgeworth, shapley, nash: Theories of distributive justice re-examined," Journal of Economic Theory, Elsevier, vol. 24(1), pages 1-39, February.
    12. repec:adr:anecst:y:2001:i:63-64:p:03 is not listed on IDEAS
    13. Daniel J. Zizzo & Andrew J. Oswald, 2001. "Are People Willing to Pay to Reduce Others'Incomes?," Annals of Economics and Statistics, GENES, issue 63-64, pages 39-65.
    14. C. Simon Fan & Oded Stark, 2011. "A Theory Of Migration As A Response To Occupational Stigma," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(2), pages 549-571, May.
    15. Rawls, John, 1974. "Some Reasons for the Maximin Criterion," American Economic Review, American Economic Association, vol. 64(2), pages 141-146, May.
    16. John C. Harsanyi, 1955. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparisons of Utility," Journal of Political Economy, University of Chicago Press, vol. 63, pages 309-309.
    17. Stark, Oded, 2013. "Stressful Integration," European Economic Review, Elsevier, vol. 63(C), pages 1-9.
    18. Hammond, Peter J., 1977. "Dual interpersonal comparisons of utility and the welfare economics of income distribution," Journal of Public Economics, Elsevier, vol. 7(1), pages 51-71, February.
    19. Sorger, Gerhard & Stark, Oded, 2013. "Income redistribution going awry: The reversal power of the concern for relative deprivation," Journal of Economic Behavior & Organization, Elsevier, vol. 86(C), pages 1-9.
    20. Fliessbach, Klaus & Weber, Bernd & Trautner, P. & Dohmen, Thomas J. & Sunde, Uwe & Elger, C. E. & Falk, Armin, 2007. "Social comparison affects reward-related brain activity in the human ventral striatum," Munich Reprints in Economics 20362, University of Munich, Department of Economics.
    21. Ireland, N. J., 2001. "Optimal income tax in the presence of status effects," Journal of Public Economics, Elsevier, vol. 81(2), pages 193-212, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bronwyn McCredie & Kerrie Sadiq & Larelle Chapple, 2019. "Navigating the fourth industrial revolution: Taxing automation for fiscal sustainability," Australian Journal of Management, Australian School of Business, vol. 44(4), pages 648-664, November.
    2. Iana Okhrimenko, 2021. "The Dichotomy of Procedural and Distributive Justice in the Theory of Social Choice," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 207-226.
    3. Vesa Kanniainen & Juha Laine & Ismo Linnosmaa, 2019. "Pricing the Pharmaceuticals when the Ability to Pay Differs: Taking Vertical Equity Seriously," CESifo Working Paper Series 8031, CESifo.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Oded Stark, 2017. "Migration when Social Preferences are Ordinal: Steady-state Population Distribution and Social Welfare," Economica, London School of Economics and Political Science, vol. 84(336), pages 647-666, October.
    2. Stark, Oded & Zawojska, Ewa & Kohler, Wilhelm & Szczygielski, Krzysztof, 2018. "An adverse social welfare effect of a doubly gainful trade," Journal of Development Economics, Elsevier, vol. 135(C), pages 77-84.
    3. Oded Stark & Fryderyk Falniowski & Marcin Jakubek, 2017. "Consensus Income Distribution," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(4), pages 899-911, December.
    4. Oded Stark & Marcin Jakubek, 2016. "Can a Concern for Status Reconcile Diverse Social Welfare Programs?," Research on Economic Inequality, in: Inequality after the 20th Century: Papers from the Sixth ECINEQ Meeting, volume 24, pages 235-246, Emerald Group Publishing Limited.
    5. Oded Stark & Marcin Jakubek & Martyna Kobus, 2015. "A bitter choice turned sweet: How acknowledging individuals’ concern at having a low relative income serves to align utilitarianism and egalitarianism," Journal of Evolutionary Economics, Springer, vol. 25(3), pages 541-557, July.
    6. Oded Stark & Marcin Jakubek & Krzysztof Szczygielski, 2020. "The social preferences of the native inhabitants, and the decision how many asylum seekers to admit," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(1), pages 133-152, February.
    7. Sorger, Gerhard & Stark, Oded, 2013. "Income redistribution going awry: The reversal power of the concern for relative deprivation," Journal of Economic Behavior & Organization, Elsevier, vol. 86(C), pages 1-9.
    8. Stark, Oded & Kobus, Martyna & Jakubek, Marcin, 2012. "A concern about low relative income, and the alignment of utilitarianism with egalitarianism," Economics Letters, Elsevier, vol. 114(3), pages 235-238.
    9. Oded STARK & Wiktor Budzinski, 2019. "Repercussions of Negatively Selective Migration for the Behavior of Non-Migrants when Preferences Are Social," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 85(2), pages 165-179, June.
    10. Aronsson, Thomas & Johansson-Stenman, Olof, 2015. "Keeping up with the Joneses, the Smiths and the Tanakas: On international tax coordination and social comparisons," Journal of Public Economics, Elsevier, vol. 131(C), pages 71-86.
    11. Ed Hopkins, 2008. "Inequality, happiness and relative concerns: What actually is their relationship?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 6(4), pages 351-372, December.
    12. Aronsson, Thomas & Johansson-Stenman, Olof, 2014. "Positional preferences in time and space: Optimal income taxation with dynamic social comparisons," Journal of Economic Behavior & Organization, Elsevier, vol. 101(C), pages 1-23.
    13. Stark, Oded, 2013. "Stressful Integration," European Economic Review, Elsevier, vol. 63(C), pages 1-9.
    14. Oded Stark & Grzegorz Kosiorowski & Marcin Jakubek, 2017. "An Adverse Social Welfare Consequence of a Rich-to-Poor Income Transfer: A Relative Deprivation Approach," Research on Economic Inequality, in: Research on Economic Inequality, volume 25, pages 1-37, Emerald Group Publishing Limited.
    15. Aronsson, Thomas & Johansson-Stenman, Olof, 2014. "Genuine Saving and Conspicuous Consumption," Working Papers in Economics 605, University of Gothenburg, Department of Economics.
    16. Dohmen, Thomas, 2014. "Behavioral labor economics: Advances and future directions," Labour Economics, Elsevier, vol. 30(C), pages 71-85.
    17. Andrew E. Clark & Claudia Senik, 2010. "Will GDP growth increase happiness in developing countries?," PSE Working Papers halshs-00564985, HAL.
    18. Boris Gershman, 2014. "The two sides of envy," Journal of Economic Growth, Springer, vol. 19(4), pages 407-438, December.
    19. Tom Truyts, 2010. "Social Status In Economic Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 24(1), pages 137-169, February.
    20. Stark, Oded, 2017. "Possible Policy Responses to a Dark Side of the Integration of Regions and Nations," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 329-341.

    More about this item

    Keywords

    Maximization of social welfare; Rawlsian social welfare function; Utilitarian social welfare function; Deadweight loss; Distaste for low relative income;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D60 - Microeconomics - - Welfare Economics - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:122:y:2014:i:3:p:439-444. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.