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Efficiency First or Equity First?: Two Principles and Rationality of Social Choice

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  • Tadenuma, Koichi

Abstract

The Pareto efficiency criterion is often in conflict with the equity criteria as no-envy or as egalitarian-equivalence: An allocation x that is Pareto superior to another allocation y can be inferior to y in consideration of equity. This paper formalizes two differnet principles of social choice under possible conflict of efficiency and equity. The efficiency-first principle requires that we should always select from efficient allocations, and when the efficiency criterion is not at all effective as a guide for selection, i.e., when all the available allocations are efficient or there is no efficient allocation, we should apply an equity criterion to choose desirable allocations. The equity-first principle reverses the lexicographic order of application of the two criteria. We examine rationality of the social choice rules satisfying these two principles. It is shown that the degree of rationality varies widely depending on which principle the social choice rules represent. Several impossibility and possibility results as well as a characterization theorem are obtained.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/17031/1/070econDP98-01.pdf
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Bibliographic Info

Paper provided by Graduate School of Economics, Hitotsubashi University in its series Discussion Papers with number 1998-01.

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Length: 24 p.
Date of creation: Jun 1998
Date of revision:
Handle: RePEc:hit:econdp:1998-01

Note: October 1996; Revised version: June 1998
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Web page: http://www.econ.hit-u.ac.jp/
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  1. Suzumura, Kotaro, 1981. "On pareto-efficiency and the no-envy concept of equity," Journal of Economic Theory, Elsevier, vol. 25(3), pages 367-379, December.
  2. H. R. Varian, 1973. "Equity, Envy and Efficiency," Working papers 115, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Feldman, Allan M & Kirman, Alan, 1974. "Fairness and Envy," American Economic Review, American Economic Association, vol. 64(6), pages 995-1005, December.
  4. Diamantaras, D. & Thomson, W., 1988. "A Refinement And Extension Of The No-Envy Concept," RCER Working Papers 133, University of Rochester - Center for Economic Research (RCER).
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