Non-Welfarist Optimal Taxation and Behavioral Public Economics

Research in behavioral economics has uncovered the widespread phenomenon of people making decisions against their own good intentions. In these situations, the government might want to intervene, indeed individuals might want the government to intervene, to induce behavior that is closer to what individuals wish they were doing. The analysis of such corrective interventions, through taxes and subsidies, might be called ”behavioral public economics.” However, such analysis, where the government has an objective function that is different from that of individuals, is not new in public economics. In these cases the government is said to be ”non-welfarist” in its objectives, and there is a long tradition of non-welfarist welfare economics, especially the analysis of optimal taxation and subsidy policy where the outcomes of individual behavior are evaluated using a preference function different from the one that generated the outcomes. The object of this paper is to first of all present a unified view of the non-welfarist optimal taxation literature and, secondly, to present behavioral public economics as a natural special case of this general framework.non-welfarism, optimal taxation, behavioral economics

Compensation and responsibility

This a chapter for the Handbook of Social Choice and Welfare. It deals with the theory of fairness applied to situations when individuals are partly responsible for their characteristics.fairness, responsibility, equal opportunity, compensation, handicap, talent, effort

Equality and information

Traditional outcome-orientated egalitarian principles require access to information about the size of individual holdings. Recent egalitarian political theory has sought to accommodate considerations of responsibility. Such a move may seem problematic, in that a new informational burden is thereby introduced, with no apparent decrease in the existing burden. This article uses a simple model with simulated data to examine the extent to which outcome egalitarianism and responsibility-sensitive egalitarianism (‘luck egalitarianism’) can be accurately applied where information is incomplete or erroneous. It is found that, while outcome egalitarianism tends to be more accurately applied, its advantage is not overwhelming, and in many prima facie plausible circumstances luck egalitarianism would be more accurately applied. This suggests that luck egalitarianism cannot be rejected as utopian. Furthermore, while some argue that, in practice, luck egalitarianism is best realized indirectly, by securing equality of outcome, our evidence suggests that a luck egalitarian rule of regulation offers a far more accurate implementation of the luck egalitarian ideal than does an outcome egalitarian rule of regulation

Optimal redistribution with unobservable disability: welfarist versus non-welfarist social objectives

This paper examines the optimal non linear income and commodity tax when the same labor disutility can receive two alternative interpretations, taste for leisure and disability, but the disability is not readily observable. We compare the optimal policyunder alternative social objectives, welfarist and non-welfarist, and conclude that the non-welfarist objective, in which the planner gives a higher weight to the disutility of labour of the disabled individuals, is the only reasonable specification. It has some foundation in the theory of responsability; further, unlike the other specifications it yields an optimal solution that may involve a lower labour supply requirement from disabled individuals.optimal non-linear taxation, quasi-linear preferences, asymmetric information, responsibility

Well-Being, Inequality and Time: The Time-Slice Problem and its Policy Implications

Should equality be viewed from a lifetime or sublifetime perspective? In measuring the inequality of income, for example, should we measure the inequality of lifetime income or of annual income? In characterizing a tax as progressive or regressive, should we look to whether the annual tax burden increases with annual income, or instead to whether the lifetime tax burden increases with lifetime income? Should the overriding aim of anti-poverty programs be to reduce chronic poverty: being badly off for many years, because of low human capital or other long-run factors? Or is the moral claim of the impoverished person a function of her current state - meaning that someone who is badly nourished, badly housed, or in pain at present has a strong claim on our aid regardless of whether this is a chronic or transient state? Should we think of the aged as a suspect class, a low-well-being group? From the sublifetime perspective, the aged are indeed a kind of suspect class, because they tend to have low current incomes and health and to be socially isolated. But the aged have lived for many years and are therefore, as a matter of lifetime well-being, relatively rich compared to the rest of the population. This Article addresses the time-slice question. I use the framework of welfarism and the formal apparatus of social welfare functions to sharpen analysis. The first half of the Article argues for the lifetime perspective. The second half surveys the implications of that perspective for a host of legal and policy issues: the measurement of equality; the measurement of poverty; the design of redistributive taxes; the question whether non-tax instruments, such as environmental regulations or tort law, should also be used for redistribution; and how the suspect class framework and other distributively sensitive policy tools should be structured. Above all, the Article aims to raise the profile of a foundational question which has been insufficiently discussed - a question that anyone who cares about equality should grapple with

Well-Being, Inequality and Time: The Time-Slice Problem and its Policy Implications

Should equality be viewed from a lifetime or sublifetime perspective? In measuring the inequality of income, for example, should we measure the inequality of lifetime income or of annual income? In characterizing a tax as progressive or regressive, should we look to whether the annual tax burden increases with annual income, or instead to whether the lifetime tax burden increases with lifetime income? Should the overriding aim of anti-poverty programs be to reduce chronic poverty: being badly off for many years, because of low human capital or other long-run factors? Or is the moral claim of the impoverished person a function of her current state - meaning that someone who is badly nourished, badly housed, or in pain at present has a strong claim on our aid regardless of whether this is a chronic or transient state? Should we think of the aged as a suspect class, a low-well-being group? From the sublifetime perspective, the aged are indeed a kind of suspect class, because they tend to have low current incomes and health and to be socially isolated. But the aged have lived for many years and are therefore, as a matter of lifetime well-being, relatively rich compared to the rest of the population. This Article addresses the time-slice question. I use the framework of welfarism and the formal apparatus of social welfare functions to sharpen analysis. The first half of the Article argues for the lifetime perspective. The second half surveys the implications of that perspective for a host of legal and policy issues: the measurement of equality; the measurement of poverty; the design of redistributive taxes; the question whether non-tax instruments, such as environmental regulations or tort law, should also be used for redistribution; and how the suspect class framework and other distributively sensitive policy tools should be structured. Above all, the Article aims to raise the profile of a foundational question which has been insufficiently discussed - a question that anyone who cares about equality should grapple with

Compensation and responsibility

This a chapter for the Handbook of Social Choice and Welfare. It deals with the theory of fairness applied to situations when individuals are partly responsible for their characteristics