Economics and Ethics
Kapitel 7
Kapitel 7
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Lernkarten
Distributive justice
Concerns the fair allocation of benefits and burdens
Distributive justice, not the braod sense of jusitce as the whole of morality
Absensce of envy
retains the pareto principle and adresses unintuitive implications by adding a fairness criterion
absence of envy: an allocation is fair, or envy-free, if no one prefers (i.e. envies) the allocation of anyone else
let N be the set of agents and (x1,...,xn) the set of allocations of these n agents
Allocation is fair: ui (xj) <= ui (xi)
an envy-free allocation always exists
Egalitarianism
Absence of envy
- Retained pareto principle and welfarism
- Added a fairness criterion defined relative to equal splits
Egalitarianism
- defines fairness as equal shares
- can be based on allocations or utility
Measuring income inequality
Definitions
xi: income of agent i
number agents such that: x1<=x2...<=xn
Envy-free and efficient allocations in a pure exchange economy
- equal divisions are envy-free
- contractcurve is pareto efficient
- points on contractcurve are fair an efficient
- such allocations always exist in a pure exchange economy
Pros and cons of absence of envy
Advantage: does not require interpersonal utility comparisson (does not know how much better the allocation is)
Disadvantages:
- Existance: Envy-free allocazions sometime do not exist in production econmies, although they do for redefined versions
- Incompleteness: neither absence of eny nor any variation is complete, since the set of fair and efficient allocations is not usually unique.
- Not envy: here envy is intrapersonal, whereas everyday envy is interpersonal
- not fairness in the everyday sense
Gini coefficient - Formula
G= A/ A+B
Gini- coefficient
measures inequality
Perfect equality: A=0, G=0
Perfect inequality: B=0, G=1
Egalitarian social welfare functions
Utilitarian SWF: w=U1+U2+...+Un
Egalitarian SWF in utilities: want Ui=Uj, so w is the same if increase Ui and Ui>Uj
how: w is based in min U (eg: person with lowest utlitiy)
Review of game theory
- Study of strategic interaction
- Descisionmakers are called players
- Non.cooperative game theory: binding agreements are not possible
Ultimatum game (special case)
- Sequential game: information about prior move of other player
Ultimatum game: Player one (proposer) proposes to split 10$ onw of two ways:
Fair: 5 to p1, 5 to p2
Unfair: 8 to p1, 2 to p2
player 2 (responder) then accepts or rejects:
Accept: proposal of player 1
Reject: 0 to p1, 0 to p2
Summary game theory
-hundereds of replications
-modal offers: 40-50%
-rare offers: 0-10% and 51-100%
-rare rejections of 40-50%
- offers below 20% rejectet about half the time
- not predicted by standard game theory or any consequentialist theory
