A Theory of Fairness and Social Welfare

The definition and measurement of social welfare have been a vexed issue for the past century. This book makes a constructive, easily applicable proposal and suggests how to evaluate the economic situation of a society in a way that gives priority to the worse-off and that respects each individual's preferences over his or her own consumption, work, leisure and so on. This approach resonates with the current concern to go 'beyond the GDP' in the measurement of social progress. Compared to technical studies in welfare economics, this book emphasizes constructive results rather than paradoxes and impossibilities, and shows how one can start from basic principles of efficiency and fairness and end up with concrete evaluations of policies. Compared to more philosophical treatments of social justice, this book is more precise about the definition of social welfare and reaches conclusions about concrete policies and institutions only after a rigorous derivation from clearly stated principles.

Marc Fleurbaey is a Research Director of the National Center for Scientific Research (CNRS) and serves on the staff of CERSES, the joint research entity of the CNRS and the Universit Paris Descartes. Franois Maniquet is Professor of Economics at CORE at the Universit Catholique de Louvain, Belgium, and teaches part time at the University of Warwick, UK.

Preface	p. xiii
Introduction	p. xv
Basics	p. 1
A Contribution to Welfare Economics	p. 3
Introduction	p. 3
Theory of Fair Allocation	p. 4
Arrovian Social Choice Theory	p. 10
Welfarism	p. 13
Multidimensional Inequality and Welfare Dominance	p. 14
Bergson-Samuelson Social Welfare Functions	p. 16
Cost-Benefit Analysis	p. 18
Money-Metric Utilities	p. 20
Conclusion	p. 22
Efficiency versus Equality	p. 23
Introduction	p. 23
Resource Equality versus Pareto Efficiency	p. 24
Accommodating Equality	p. 28
Conclusion	p. 37
Priority to the Worst-Off	p. 39
Introduction	p. 39
Absolute Priority to the Worst-Off	p. 40
From Nested-Contour Transfer to Absolute Priority	p. 46
From Equal-Split Transfer to Absolute Priority	p. 49
Conclusion	p. 52
The Informational Basis of Social Orderings	p. 54
Introduction	p. 54
The Feasible Set	p. 54
Information on Preferences	p. 60
Allocation Rules as Social Ordering Functions	p. 67
Conclusion	p. 70
Distribution	p. 73
Fair Distribution of Divisible Goods: Two Approaches	p. 75
Introduction	p. 75
From Equal Split to ¿-Equivalence	p. 75
A Walrasian SOF	p. 80
Second-Best Applications	p. 90
Conclusion	p. 95
Specific Domains	p. 98
Introduction	p. 98
Expected Utility	p. 98
Nonconvex Preferences	p. 101
Homothetic Preferences	p. 105
Indivisibles	p. 109
Conclusion	p. 114
Extensions	p. 115
Introduction	p. 115
Cross-Profile SOFs	p. 116
Functionings	p. 121
Legitimate Endowments	p. 123
Rationalizing Allocation Rules	p. 127
Conclusion	p. 131
Production	p. 133
Public Goods	p. 135
Introduction	p. 135
The Model	p. 136
Three Axioms	p. 139
Two Solutions	p. 143
Pure Public Goods	p. 154
Second-Best Applications	p. 158
Private Goods	p. 166
Introduction	p. 166
A Simple Model with Private Rights on the Input	p. 167
Assessing Reforms	p. 171
A Third-Best Analysis	p. 172
A General Model of Production and Allocation	p. 175
Conclusion	p. 178
Unequal Skills	p. 180
Introduction	p. 180
The Model	p. 182
Compensation versus Responsibility: Ethical Dilemmas	p. 183
Weakening the Basic Axioms	p. 188
Compromise Axioms	p. 195
From Transfer to Priority Axioms	p. 197
Conclusion	p. 201
Income Taxation	p. 203
Introduction	p. 203
The Model	p. 204
Assessing Reforms	p. 208
Optimal Taxation Schemes in a Simple Economy	p. 217
Optimal Taxation Schemes	p. 222
Conclusion	p. 232
Conclusions	p. 234
Appendix A: Proofs	p. 239
Chapter 3: Priority to the Worst-Off	p. 239
Chapter 5: Fair Distribution of Divisible Goods	p. 242
Chapter 6: Specific Domains	p. 263
Chapter 7: Extensions	p. 272
Chapter 10: Unequal Skills	p. 275
Bibliography	p. 279
Index	p. 287
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A Theory of Fairness and Social Welfare

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