People can put a price tag on economic justice, economists say

November 15, 2007

How much would you pay to live in an equitable society in which people get what they deserve and deserve what they get? Economists at Carnegie Mellon University and the Free University of Berlin have developed a mathematical model to measure the value that people place on distributive justice – whether goods are distributed fairly among all members of society.

Applying their model to pre-existing survey data, the authors found that, on average, people are willing to sacrifice about 20 percent of their disposable income to live in an equitable society – but they also found that the value a person places on equity is substantially affected by their race and educational background.

Whites place a higher value on equity than non-whites, and equity is valued more by those with high levels of education than those with less education. The paper was written by Giacomo Corneo at the Free University of Berlin and Christina Fong at Carnegie Mellon, and it is being published in the Journal of Public Economics.

“In many countries, a large share of the government's budget is devoted to redistributing income, supposedly for equity reasons. Since governmental redistribution is costly for society, some knowledge of society's willingness to pay for distributive justice is required in order to evaluate whether that public good is efficiently provided,” the authors write.

Distributive justice can be guided by one of three principles: need, in which income is distributed to individuals based on their needs; equality, in which income is shared equally by all members of a society; or equity, in which income is distributed based on a person’s effort. Whether a person believes we live in an equitable society depends in large measure on whether they believe that labor markets are inherently fair. Do people succeed mostly because of their own hard work, or do people often fail because of bad luck or circumstances beyond their control?

Corneo and Fong analyzed data from the 1998 Gallup poll titled “Haves and Have-Nots,” which gauged respondents’ attitudes toward wealth and poverty as well as government welfare policies. The Gallup poll included questions about why the respondents believed that people became rich or poor, and whether government should redistribute wealth. The survey did not explicitly ask what monetary value the respondents placed on distributive justice, so Corneo and Fong developed their model to use the survey data to answer that question.

Simply asking people outright how much they would pay to achieve an economically just society poses many problems. For example, someone who believes that justice is important to them could exaggerate their response to a question about how much they’d be willing to sacrifice to achieve, because there is no actual cost involved, but an artificially strong response may affect policy makers. People also tend to state higher values of items that they are considering giving up, and lower values of things they are looking to acquire.

For the purposes of their model, Corneo and Fong assume that people hold one of two diametrically opposed beliefs: a laissez-faire view of the economy in which labor markets are inherently fair, rewarding hard work alone and that any form of income redistribution (e.g. via income taxes and welfare) is unjust; or a belief that labor markets are unjust and reward people based on luck.

People who have a laissez-faire attitude toward the economy would give up 20 percent of their income to live in a society in which government does not transfer income from the rich to the poor. On the contrary, those who hold the opposite belief would give up 20 percent of their income to live in a society in which the government does transfer income to the poor. In reality, of course, many people do not hold such black-and-white views, and the authors write that further research might examine how more nuanced perceptions affect the value a person places on distributive justice.

Source: Carnegie Mellon University

Explore further: Martin Ford, on the robots coming for your job

Related Stories

What's the role of virtues in the lab?

February 3, 2015

The evolution of science and engineering in the 21st century has transformed the role of these professions in profound ways that affect research, scholarship and the practice of teaching in the university setting.

Computer system simulates the behavior of tax evaders

March 10, 2014

Universitat Autonoma de Barcelona researchers have developed a computer model which, in different situations, simulates the behavior of taxpayers when faced with the possibility of committing tax evasion. The simulator, described ...

Migrant children are the litmus test of the education system

February 14, 2014

We live in a multilingual society. More than a million children attending British schools speak more than 360 languages between them in addition to English. An exploratory study is looking at the needs of these children and ...

Immigration law not created equally according to study

June 26, 2013

Immigrant women who go through the legalization process are not treated equitably, according to a new study, "Gendered Paths to Legal Status: The Case of Latin American Immigrants in Phoenix, Arizona."

Recommended for you

The hand and foot of Homo naledi

October 6, 2015

The second set of papers related to the remarkable discovery of Homo naledi, a new species of human relative, have been published in scientific journal, Nature Communications, on Tuesday, 6 October 2015.

Who you gonna trust? How power affects our faith in others

October 6, 2015

One of the ongoing themes of the current presidential campaign is that Americans are becoming increasingly distrustful of those who walk the corridors of power – Exhibit A being the Republican presidential primary, in which ...

Chimpanzees shed light on origins of human walking

October 6, 2015

A research team led by Stony Brook University investigating human and chimpanzee locomotion have uncovered unexpected similarities in the way the two species use their upper body during two-legged walking. The results, reported ...

How much for that Nobel prize in the window?

October 3, 2015

No need to make peace in the Middle East, resolve one of science's great mysteries or pen a masterpiece: the easiest way to get yourself a Nobel prize may be to buy one.


Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.