4,373 research outputs found

    - POWER INDICES AND THE VEIL OF IGNORANCE

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    We provide an axiomatic foundation of the expected utility preferences over lotteries on roles in simple superadditive games represented by the two main power indices, the Shapley-Shubik index and the Banzhaf index, when they are interpreted as von Neumann-Morgenstern utility functions. Our axioms admit meaningful interpretations in the setting proposed by Roth in terms of different attitudes toward risk involving roles in collective decision procedures under the veil of ignorance. In particular, an illuminating interpretation of ''efficiency'', up to now missing in this set up, as well as of the corresponding axiom for the Banzhaf index, is provided.Power indices, voting power, collective decision-making, lotteries

    Endogenous Political Institutions

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    Political institutions influence economic policy, but they are themselves endogenous since they are chosen, in some way, by members of the polity. An important aspect of institutional design is how much society chooses to delegate unchecked power to its leaders. If, once elected, a leader cannot be restrained, society runs the risk of a tyranny of the majority, if not the tyranny of a dictator. If a leader faces too many ex post checks and balances, legislative action is too often blocked. As our critical constitutional choice we focus upon the size of the minority needed to block legislation, or conversely the size of the (super) majority needed to govern. We analyze both 'optimal' constitutional design and 'positive' aspects of this process. We derive several empirical implications which we then discuss.

    Endogenous Political Institutions

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    Political institutions influence economic policy, but they are themselves endogenous since they are chosen, in some way, by members of the polity. An important aspect of institutional design is how much society chooses to delegate unchecked power to its leaders. If, once elected, a leader cannot be restrained, society runs the risk of a tyranny of the majority, if not the tyranny of a dictator. If a leader faces too many ex post checks and balances, legislative action is too often blocked. As our critical constitutional choice we focus upon the size of the minority needed to block legislation, or conversely the size of the (super)majority needed to govern. We analyze both ñ€Ɠoptimalñ€ constitutional design and ñ€positiveñ€ aspects of this process. We derive several empirical implications which we then discuss.

    The origins of fair play

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    This paper gives a brief overview of an evolutionary theory of fairness. The ideas are fleshed out in Binmore's book 'Natural Justice' (Oxford University Press, New York, 2005.), which is itself a condensed version of his earlier two-volume book 'Game Theory and the Social Contract' (MIT Press, Cambridge, MA, 1994 and 1998)

    Interpersonal comparison in egalitarian societies

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    When judging what is fair, how do we decide how much weight to assign to the conflicting interests of different classes of people? This subject has received some attention in a utilitarian context, but has been largely neglected in the case of egalitarian societies of the kind studied by John Rawls. My Game Theory and the Social Contract considers the problem for a toy society with only two citizens. This paper examines the theoretical difficulties in extending the discussion to societies with more than two citizens

    Is the Veil of Ignorance Transparent?

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    Theories of justice in the spirit of Rawls and Harsanyi argue that fair-minded people should aspire to make choices for society as if in the original position, that is, behind a veil of ignorance that prevents them from knowing their own social positions in society. In this paper, we provide a framework showing that preferences in front of the veil of ignorance (i.e., in face of every day risky situations) are entirely determined by ethical preferences behind the veil. Moreover, by contrast with Kariv & Zame (2008), in many cases of interest, the converse is not true: ethical decisions cannot be deduced from economic ones. This not only rehabilitates distributive theories of justice but even proves that standard decision theory in economic environments cannot be separated from ethical questioning.Business Ethics; Distributional Justice; Maximin Principle; Moral Preferences; Original Position; Social Choice; Social Preferences; Theory of Justice; Utilitarianism; Veil of Ignorance

    Evaluating Real World Income Distributions behind the Veil of Ignorance - How Risk Averse do you have to be to Prefer Europe over the US?

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    The paper uses a veil of ignorance approach and income distribution data of developed countries to arrive at inequality corrected income rankings. While a risk neutral individual (based on year 2000 data) would have preferred to be born into the US rather than any European country in our sample except Luxembourg, a coefficient of relative risk aversion of 2 suffices to make several European countries look preferable. The paper also sheds light on the risk corrected average income on a gender basis and scans for times of diminished expectations, i.e. periods where the expected utility of being born into a country has reduced over time.income distribution, veil of ignorance, cross country comparison

    Birth Satisfaction Units (BSU): Measuring Cross-National Differences in Human Well-Being

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    While everyone agrees that GDP per capita is an inadequate measure of a country’s overall “development” it is difficult to specify what, if anything, should take its place as a useful single summary number (or even just ranking). The Human Development Index is a prominent alternative which moves towards the notion of a more comprehensive measure of human wellbeing, but suffers many limitations in the limits of the domains it covers (only adding mortality and education) and in how those domains are assessed (only averages). I propose that a useful conceptual device is to imagine that individuals were ranking the countries they were to be born into, not knowing what position in that country they would occupy (e.g. male or female, rich or poor). The result could be a cardinal ranking of country of birth satisfaction units, how strongly someone would prefer to be born into country X versus country Y. While this thought experiment obviously does not of itself resolve any of the key issues, it can provide a framework for reasoning about how people would produce such a ranking: the domains of well being they would assess as important and how they would assess the distribution of well-being in those domains (e.g. would they care about the average, levels of absolute deprivation, inequalities).Human Development, Poverty, Vulnerability

    Tax policy design in the presence of social preferences: some experimental evidence

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    This paper reports the results of experiments designed to examine whether a taste for fairness affects people’s preferred tax structure. Building on the Fehr and Schmidt (1999) model, we devise a simple test for the presence of social preferences in voting for alternative tax structures. The experimental results show that individuals demonstrate concern for their own payoff and inequality aversion in choosing among alternative tax structures. However, concern for redistribution decreases when it leads to increasing deadweight losses. Our findings have important implications for the design of optimal tax theory.
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