Responsibility, Well-Being, Information, and the Design of Distributive Policies

The model developed in this paper admits a systematic discussion of the normative rationale behind the use of two distributive instruments: negative income taxation, creating an unconditional basic income, on the one hand and wage subsidies on the other hand. The model integrates two opposite conceptions of personal responsibility (whether or not we are responsible for our propensity to work in the labour market) into a single framework. Thus we can compare these conceptions systematically, and define conditions for practical convergence between the policies they indicate. This framework also illustrates how optimal taxation theory may proceed when utilities are considered ordinal and interpersonally not comparable. This requires the definition of an objective notion of individual well-being. I incorporate "time for non-market activity" in the definition of well-being. The model shows how alternative choices with regard to the inclusion and weighing of "time for non-market activity" in the Rawlsian basket of primary goods affect the prescription of policies. More generally, it shows how alternative conceptions of well-being affect the posttransfer reward scheme the government proposes. The model is used to illustrate the idea, defended by Fleurbaey et al., that responsibility-sensitive egalitarian justice imposes a principle of natural reward. Given the simplifying assumptions of the model, I will establish, in the second-best regimes and excluding corner solutions, for each conception of responsibility and set of instruments, a one-to-one correspondence between principles of reward, on the one hand, and conceptions of individual well-being on the other hand. Hence, given these assumptions and conditions, there is a unique definition of well-being which yields a neutral principle of reward, i.e. there is a unique "neutral" official conception of the citizens’ individual well-being. The model is then used to study the "egalitarian earnings subsidy scheme" proposed by White (1999) and to assess a related discussion between White (1997) and Van Parijs (1997) on basic income and the principle of reciprocity. According to White the principle of reciprocity implies the use of wage subsidies and the rejection of basic income. The model shows that basic income and a wage subsidy can be complementary instruments. However, under certain conditions, a neutral principle of reward demands that earned income taxation only be used to fund wage subsidies, so that a basic income has to be funded (possibly together with other expenditures) by a capital income tax on available "personal dividends".