Fairness in Markets and Government Policies
AbstractAn allocation is said to be ``weakly envy-free'' if there is no individual who envies others with the same or smaller endowments. The requirement is a necessary condition for an allocation to be envy-free [Foley (1967)]. We show that competitive equilibrium allocations in exchange economies are weakly envy-free, i.e., this weak notion of fairness is achieved in markets. Since governments are expected to improve fairness in economies, it seems natural to require government policies satisfy this minimum requirement, which we refer to as no-envy criterion. We show that well-known equity criteria for government policies need not satisfy the no-envy criterion. Since the benefit tax (e.g., Lindahl tax) in general does not satisfy the no-envy criterion either, we argue that it is not a fair tax to finance pure public goods and show a result which supports income tax and commodity tax as fair taxes. The result suggests that the no-envy criterion may be indeed adopted by governments as an equity criterion. It is also argued that when public goods are not pure the benefit tax must be introduced because the income tax and the commodity tax no longer satisfy the no-envy criterion.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Toronto, Department of Economics in its series Working Papers with number yamashig-95-03.
Length: 37 pages
Date of creation: 09 Sep 1995
Date of revision:
Contact details of provider:
Postal: 150 St. George Street, Toronto, Ontario
Phone: (416) 978-5283
Fairness; Competative Equilibrium; Government Policy;
Find related papers by JEL classification:
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Schmeidler, David & Vind, Karl, 1972.
"Fair Net Trades,"
Econometric Society, vol. 40(4), pages 637-42, July.
- Sato, Toshihiro, 1987. "Equity, fairness and lindahl equilibria," Journal of Public Economics, Elsevier, vol. 33(2), pages 261-271, July.
- 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.
- Varian, Hal R., 1974.
"Equity, envy, and efficiency,"
Journal of Economic Theory,
Elsevier, vol. 9(1), pages 63-91, September.
- Panzer, Elisha A & Schmeidler, David, 1974. "A Difficulty in the Concept of Fairness," Review of Economic Studies, Wiley Blackwell, vol. 41(3), pages 441-43, July.
- Mervyn A. King, 1983. "An Index of Inequality: With Applications to Horizontal Equity and Social Mobility," NBER Working Papers 0468, National Bureau of Economic Research, Inc.
- King, Mervyn A, 1983. "An Index of Inequality: With Applications to Horizontal Equity and Social Mobility," Econometrica, Econometric Society, vol. 51(1), pages 99-115, January.
- Thomson, William, 1983. "Equity in exchange economies," Journal of Economic Theory, Elsevier, vol. 29(2), pages 217-244, April.
- H. R. Varian, 1975.
"Two Problems in the Theory of Fairness,"
163, Massachusetts Institute of Technology (MIT), Department of Economics.
- Thomson, William, 1982. "An informationally efficient equity criterion," Journal of Public Economics, Elsevier, vol. 18(2), pages 243-263, July.
- "Sato, Toshihiro", 1985. "Equity and Fairness in an Economy with Public Goods," Economic Review, Hitotsubashi University, vol. 36(4), pages 364-373, January.
- Pazner, Elisha A., 1977. "Pitfalls in the theory of fairness," Journal of Economic Theory, Elsevier, vol. 14(2), pages 458-466, April.
- Musgrave, Richard A., 1990. "Horizontal Equity, Once More," National Tax Journal, National Tax Association, vol. 43(2), pages 113-22, June Cita.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RePEc Maintainer).
If references are entirely missing, you can add them using this form.