The Appropriate Treatment of Distribution in Economics

-

Documents
20 pages
Obtenez un accès à la bibliothèque pour le consulter en ligne
En savoir plus

Description

Niveau: Supérieur, Doctorat, Bac+8
The Appropriate Treatment of Distribution in Economics Nicolaus Tideman* Abstract This paper argues that to address questions of distribution that concern economists, one must combine economics with a theory of justice. The paper traces the implications of one theory of justice that can be combined with economics, namely a theory that assumes that people have rights to themselves and that all people have equal rights to natural opportunities. This theory implies that people have the right to form the governments they choose, provided that they do not appropriate more than their shares of natural opportunities and that they allow all those who wish to do so to leave or to secede. The theory of justice also implies that there should be transfers among governments to equalize per-capita appropriations of natural opportunities. The obligation to compensate for appropriations of natural opportunities induces an incentive to make efficient decision about all appropriations of natural opportunities and all actions that benefit or harm other nations. The theory implies that in a just world the issues of distribution that concern economists become questions of morality or efficiency rather than justice, while in an unjust world these issues require tragic choices. * Professor of Economics, Virginia Tech. I am grateful to Florenz Plassmann for helpful comments.

  • should act

  • before there

  • economists

  • social welfare

  • vilfredo pareto

  • welfare function

  • normative assumption


Sujets

Informations

Publié par
Nombre de visites sur la page 49
Langue English
Signaler un problème
The Appropriate Treatment of Distribution in Economics  Nicolaus Tideman* Abstract This paper argues that to address questions of distribution that concern economists, one must combine economics with a theory of justice. The paper traces the implications of one theory of justice that can be combined with economics, namely a theory that assumes that people have rights to themselves and that all people have equal rights to natural opportunities. This theory implies that people have the right to form the governments they choose, provided that they do not appropriate more than their shares of natural opportunities and that they allow all those who wish to do so to leave or to secede. The theory of justice also implies that there should be transfers among governments to equalize per-capita appropriations of natural opportunities. The obligation to compensate for appropriations of natural opportunities induces an incentive to make efficient decision about all appropriations of natural opportunities and all actions that benefit or harm other nations. The theory implies that in a just world the issues of distribution that concern economists become questions of morality or efficiency rather than justice, while in an unjust world these issues require tragic choices.                                                   * Professor of Economics, Virginia Tech. I am grateful to Florenz Plassmann for helpful comments.
I. Introduction Questions of distribution arise in economics mainly in two ways: First, in the evaluation of proposed economic policies that increase total output but entail unintended redistribution, and second, in the evaluation of programs that a politically dominant coalition regards as achieving a more appropriate income distribution. A reduction in a tariff increases total output but it makes some people worse off. We could devise a program that provided compensation, but some people would be worse off because we never have enough information to know how much compensation is needed. What, if anything, permits us to say that a tariff reduction is a good thing? A program to support the poor by taxes on those who are better off need not make those who are taxed worse off, because those who are taxed may have compassion for the poor. But some of those who are taxed will lack compassion, and they will be taxed anyway. On what basis, if any, can we say that it is appropriate to tax them? There are three frameworks for addressing such questions that economists typically employ: the Paretan framework, the social welfare function framework, and the cost-benefit framework. More than 100 years ago, Vilfredo Pareto expressed the economists’ dilemma (translated from French): Consider any position and assume that we move away from it by a very small amount, consistent with the restrictions [on what is economically feasible]. If in so doing the welfare of all the individuals of the collectivity is increased, it is obvious that the new position is more advantageous to each of them; and vice versa, it is less so if the welfare of all of the individuals is decreased. Moreover, the welfare of some of them can remain the same, without changing these conclusions. But on the other hand, if this small movement increases the welfare of certain individuals and decreases that of others, we can no longer state positively that it is advantageous to the entire collectivity to carry out that movement. 1  Pareto’s ideas led to the definitions of Pareto improvement and Pareto optimality. Economists generally feel that they are on solid ground when selling the virtues of Pareto improvements; changes that are not Pareto improvements make us nervous. But we never have a solid basis for claiming that a proposed change would be a Pareto improvement. We                                                  1 Vilfredo Pareto, Manual of Political Economy (New York, 1971 [1909]), pp. 4512.