It is Hobbes, not Rousseau : an experiment on social insurance

We perform an experiment on social insurance to provide a laboratory replica of some important features of the welfare state. In the experiment, all individuals in a group decide whether to make a costly effort, which produces a random (independent) outcome for each one of them. The group members then vote on whether to redistribute the resulting and commonly known total sum of earnings equally amongst themselves. This game has two equilibria, if played once. In one of them, all players make effort and there is little redistribution. In the other one, there is no effort and nothing to redistribute. A solution to the repeated game allows for redistribution and high effort, by the threat to revert to the worst of these equilibria. Our results show that redistribution with high effort is not sustainable. The main reason for the absence of redistribution is that rich agents do not act differently depending on whether the poor have worked hard or not. There is no social contract by which redistribution may be sustained by the threat of punishing the poor if they do not exert effort. Thus, the explanation of the behavior of the subjects lies in Hobbes, not in Rousseau

It is Hobbes, not Rousseau:an experiment on voting and redistribution

We perform an experiment which provides a laboratory replica of some important features of the welfare state. In the experiment, all individuals in a group decide whether to make a costly effort, which produces a random (independent) outcome for each one of them. The group members then vote on whether to redistribute the resulting and commonly known total sum of earnings equally amongst themselves. This game has two equilibria, if played once. In one of them, all players make effort and there is little redistribution. In the other one, there is no effort and nothingWe thank Iris Bohnet, Tim Cason, David Cooper, John Duffy, Maia Guell, John Van Huyck and Robin Mason for helpful conversations and encouragement. The comments of the Editor and two referees helped improve the paper. We gratefully acknowledge the financial support from Spain’s Ministry of Science and Innovation under grants CONSOLIDER INGENIO 2010 CSD2006-0016 (all authors), ECO2009-10531 (Cabrales), ECO2008-01768 (Nagel) and the Comunidad de Madrid under grant Excelecon (Cabrales), the Generalitat de Catalunya and the CREA program (Nagel), and project SEJ2007-64340 of Spain’s Ministerio de Educación y Ciencia (Rodríguez Mora).Publicad

Exiting a lawless state

An earlier paper showed that an economy could be trapped in an equilibrium state in which the absence of the rule of law led to asset-stripping, and the prevalence of asset-stripping led to the absence of a demand for the rule of law, highlighting a coordination failure. This paper looks more carefully at the dynamics of transition from a non-rule-of-law state. The paper identifies a commitment problem as the critical feature inhibiting the transition: the inability, under a rule of law, to forgive theft. This can lead to the perpetuation of the non-rule-of-law state, even when it might seem that the alternative is Pareto-improving.Public Sector Corruption&Anticorruption Measures,National Governance,Labor Policies,Gender and Law,Bankruptcy and Resolution of Financial Distress