Veil of Ignorance

Monetary valuations for mortality and health risk reductions, elicited through stated preference surveys, have been shown to include values placed on others' welfare. Less attention has been paid to how these altruistic concerns, and hence willingness to pay (WTP), are affected when the public good is to be provided through taxation. We set up a theoretical framework to investigate this issue and show that when we move away from a first-best tax, WTP becomes distorted. However, once a 'Veil of Ignorance' is introduced into the model, this distortionary impact is reduced. We test this empirically using a laboratory experiment and confirm our theoretical findings, generating WTP values that are closer to the social optimum.

Choices involving risk significantly affect the distribution of income and wealth in society. This paper reports the results of the first experiment, to our knowledge, to study fairness views about risk-taking, specifically whether such views are based chiefly on ex ante opportunities or on ex post outcomes. We find that, even though many participants focus exclusively on ex ante opportunities, most favor some redistribution ex post. Many participants also make a distinction between ex post inequalities that reflect differences in luck and ex post inequalities that reflect differences in choices. These findings apply to both stakeholders and impartial spectators. (JEL D63, D81, H23)

The literature on the economics of inequality conventionally uses the utilitarian social welfare function as a tool for comparing income distributions. This approach usually suppresses the distinction between two types of ‘inequality aversion’. The formal analysis of these two types is examined and the results of an informal survey are reported.

Reiche Länder, hoher Ausstoss «Wie ist es möglich, dass die intelligenteste Kreatur, die je auf diesem Planeten gelebt hat, ihr einziges Zuhause zerstört?», fragte die bekannte Primatenforscherin Jane Goodall 2015 in einem Interview auf der UNO-Klimakonferenz in Paris. 3 Eine einfache Antwort gibt es nicht. Doch die Frage lenkt den Blick auf das Wesentliche, insbesondere die kollektive Verantwortung der Menschheit für die Übernutzung natürlicher Ressourcen und die Freisetzung klimaschädlicher Treibhausgase. Diese Verantwortung liegt jedoch nicht bei allen Menschen gleichermassen. Historisch sind die USA, China, Russland, Deutschland und Grossbritannien die fünf grössten Emittenten von CO2 (kumulierte Gesamtemissionen 1850-2007). 4 Damit sind diese Länder hauptverantwortlich für eine noch nie dagewesene Konzentration von CO2 in der Erdatmosphäre 5 -einem globalen öffentlichen Gut. Die fünf aktuell grössten Emittenten (absolute Werte) sind China, die USA, die EU, Indien und Russland (Deutschland allein liegt 2016 #9 CDE POLICY BRIEF Foto: S. Moser Die Wissenschaft ist sich einig: Der Mensch verändert mit der Verbrennung fossiler Energieträger das Klima. 1 Die damit verbundenen Risiken 2 -steigende Temperaturen, steigende Meeresspiegel, Meeresversauerung, Zunahme von Dürren und anderen Wetterextremen, Klimaflucht und Ressourcenkonfliktemachen einen Kurswechsel unabdingbar. Wir müssen unsere Abhängigkeit von fossilen Brennstoffen schnellstmöglich massiv verringern. In reichen, konsumorientierten Ländern verursachen Privathaushalte einen beträchtlichen Anteil der CO 2 -Emissionen. Doch welche Haushalte verbrauchen am meisten Energie, und wie lässt sich ihr CO 2 -Fussabdruck verringern? Der vorliegende Policy Brief beleuchtet diese Fragen am Beispiel Deutschlands -eines der grössten Treibhausgasemittenten Europas, aber auch eines Vor reiters in der Förderung sauberer, erneuerbarer Energien. Die hier präsentierte Forschung fokussiert auf Deutschland. brought to you by CORE View metadata, citation and similar papers at core.ac.uk provided by Bern Open Repository and Information System (BORIS) * Anmerkung: Die Werte beruhen auf Emissionen des direkten Energieverbrauchs, berechnet auf der Basis von Daten zum individuellen und zum Haushaltsverbrauch. Der indirekte Verbrauch und die entsprechenden Emissionen (z. B. Industrieemissionen) sind daher nicht enthalten. Einzig im Bereich «Nahrungsmittel» wurden auch indirekte Werte mitberücksichtigt.

The paper uses a veil of ignorance approach and income distribution data of developed countries to arrive at inequality corrected income rankings. While a risk neutral individual (based on year 2000 data) would have preferred to be born into the US rather than any European country in our sample except Luxembourg, a coefficient of relative risk aversion of 2 suffices to make several European countries look preferable. The paper also sheds light on the risk corrected average income on a gender basis and scans for times of diminished expectations, i.e. periods where the expected utility of being born into a country has reduced over time. JEL-Code: D310, H230.

In this paper, we propose an empirical test of the theory of the veil of ignorance in the Canadian context. Adopting a cognitive perspective, we read the Canadian Constitution as an indication of the motivations that the Constitution drafters had at the time of adoption so as to assess whether the Constitution reflects more their own private interests than the general interest. We proceed in three steps. First we formulate a conceptual framework based on power analysis to distinguish three distributions of power that decision-makers want to maintain or modify through their choices. Second we detail a content analysis method that helps us systematically unveil the power relations present in the Constitutional documents. Third, we describe and discuss our results, showing that the two Constitutional documents we analysed reflect the general interest more than the constitution drafters' private interests.

A real-effort experiment is conducted in order to detect preferences for one of three different models of Welfare State characterized by different schemes of tax-and-transfers. Experimental subjects have to choose (both under and without veil of ignorance concerning their position in the society created in the lab) among: a) a baseline proportional scheme, where the State is neutral with respect to risk heterogeneity; b) an actuarially-fair scheme where low-ability and low-earnings subjects bear individual full responsibility for risk exposure; c) a progressive scheme where mutual risk insurance spreads risk across all subjects, so that low-ability and low-earnings individuals are compensated. The aim is to investigate how subjects posit with respect to the task performed by the Welfare State, which is the interaction between inequality of opportunity and income inequality facing low-ability and low-earnings individuals due to their relatively higher risk exposure. Our most relevant finding is that preference is not much motivated by a justice principle, but mainly by the expectation on one's own position in the society.

A real-effort experiment is conducted in order to detect preferences for one of three different models of Welfare State characterized by different schemes of tax-and-transfers. Experimental subjects have to choose (both under and without veil of ignorance concerning their position in the society created in the lab) among: a) a baseline proportional scheme, where the State is neutral with respect to risk heterogeneity; b) an actuarially-fair scheme where low-ability and low-earnings subjects bear individual full responsibility for risk exposure; c) a progressive scheme where mutual risk insurance spreads risk across all subjects, so that low-ability and low-earnings individuals are compensated. The aim is to investigate how subjects posit with respect to the task performed by the Welfare State, which is the interaction between inequality of opportunity and income inequality facing low-ability and low-earnings individuals due to their relatively higher risk exposure. Our most relevant finding is that preference is not much motivated by a justice principle, but mainly by the expectation on one's own position in the society.

TEIL III DER VORSCHLAG 193 Das Versprochene 196 »Wir sind schon gut« einfordern 201 Das Volksbegehren *95 Lohnt es sich? ANHANG 213 Anmerkungen 218 Literaturverzeichnis EINLEITUNG Immer wieder ertappe ich mich bei der Frage, ob die Dinge wirklich so kommen könnten, wie ich sie hier dargestellt habe, ob das nicht alles weit hergeholt ist, ein wenig hysterisch. Ich klopfe die Argumente ab, ich vergleiche. Ich komme zu dem Schluss: nein, nicht hysterisch. Wirklich glauben will ich es aber immer noch nicht. Philipp Blom1 Es gibt Probleme, die sind schwer zu lösen, weil sie schwer zu lö sen sind. Und es gibt Probleme, die sind schwer zu lösen, gerade weil ihre Lösung so einfach wäre, wenn man es sich nur einge stünde. Das Klimaproblem ist im Kern entwaffnend einfach: Es geht darum, keinen fossilen Kohlenstoff mehr zu verbrennen: Kein Erdöl. Kein Erdgas. Keine Kohle. Es geht darum, dass der fossile Kohlenstoff bleibt, wo er seit Jahrhundertmillionen ist: im Boden. Für den Fall, dass Sie es ganz eilig haben, sage ich Ihnen jetzt, was eine gute Klimapolitik ist: Es geht nicht darum, mehr Wind kraftwerke und Solarpanels aufzustellen. Es geht nicht darum, ineffiziente Glühbirnen zu verbieten. Und vergessen Sie »um- * Die USA stiegen unter der Präsi dentschaft von Barack Obama zum größten Erdölförderer der Welt auf. Obama gilt als Good guy der Kli mapolitik, und im Vergleich zu sei nem Nachfolger Trump war er das gewiss. Aber auch Obama brüstete sich -je nach Publikum -m it dem Ausbau der Förderung fossiler Energien. So sagte er am 22. März 2012 in Cushing, Oklahoma: »Heu te, unter meiner Regierung, produziert Amerika mehr Öl als je zuvor in den letzten achtzig Jahren. [Applaus.] Das ist wichtig zu wissen. In den letzten drei Jahren habe ich meine Regie rung angewiesen, M illionen von Acres in 23 Bundesstaaten für die Suche nach Öl und Gas freizugeben. Wir haben die Zahl der Bohranlagen vervierfacht. Wir haben so viele Öl-und Gaspipelines neu gebaut, dass man damit die Erde umrunden könnte.« (Obama 2012).

In his influential work, A Theory of Justice, John Rawls (1971) introduced the notion of a "veil of ignorance" as a conceptual device for promoting just choices. On the premise that getting conflicting parties to think more fairly is a good first step toward achieving agreement, we develop Rawls's notion into a set of mediator tools. Potentially biasing information can be excluded from consideration by means of thin veils, thick veils, or cloaks. A thin veil consists of instructions to disregard information that is known and already in consciousness. A thick veil makes it more difficult for information that is known but not in consciousness to be brought to consciousness. A cloak withholds information that is not yet known. Opportunities to apply cloaks and veils of ignorance arise in fact conflicts, value conflicts, and interest conflicts. To maximize effectiveness, preference should be given to cloaks over thick veils and to thick veils over thin veils. Finally, we explore the ethical considerations facing the mediator when using cloaks and veils. 2 Id. at 136-7. 3 Id 4 RAwLs at 136-7. 5 Id. at 141.

In his influential work, A Theory of Justice, John Rawls (1971) introduced the notion of a "veil of ignorance" as a conceptual device for promoting just choices. On the premise that getting conflicting parties to think more fairly is a good first step toward achieving agreement, we develop Rawls's notion into a set of mediator tools. Potentially biasing information can be excluded from consideration by means of thin veils, thick veils, or cloaks. A thin veil consists of instructions to disregard information that is known and already in consciousness. A thick veil makes it more difficult for information that is known but not in consciousness to be brought to consciousness. A cloak withholds information that is not yet known. Opportunities to apply cloaks and veils of ignorance arise in fact conflicts, value conflicts, and interest conflicts. To maximize effectiveness, preference should be given to cloaks over thick veils and to thick veils over thin veils. Finally, we explore the ethical considerations facing the mediator when using cloaks and veils. 2 Id. at 136-7. 3 Id 4 RAwLs at 136-7. 5 Id. at 141.

This paper introduces a new perspective on Rawls’s Difference Principle. We link two distinctive approaches to analysing the social welfare implications of alternative policy actions; the utilitarian approach and the Rawlsian distributive justice approach, together in a cohesive way. While there is a large optimal tax literature, that literature generally treats the decision maker as a utilitarian. This paper adds a different dimension in that we compare and contrast what would happen if a Rawlsian government (RG), had as its objective function maximizing the utility of the poorest social group and compare that economic state to one where a utilitarian government (UG) existed that had as its principle objective maximizing the total utility of its entire society but subject to the constraint of a targeted level of inequality, using the maximum entropy method to capture the distribution of individual ability. Each government chooses tax parameters to achieve their respective goals und...

Is taxation of capital income inefficient? And if so, why do democratic governments persist with such taxation? In this paper, we evaluate the likely impact of capital taxation in the United Kingdom. The theoretical argument displaying the overall inefficiency of capital ...

The idea that there is a uniformly "optimal" governance structure for corporations features prominently in current debates and policy proposals. In this paper, we propose a different, constitutional theory of corporate governance: the criterion for a good corporate governance structure is whether it is freely chosen by the shareholders. We illustrate our approach by comparing the constitutional rights of shareholders under US corporate law and Swiss corporate law. Moreover, we discuss the mandatory provisions that shareholders would likely include in corporate law at a constitutional stage, behind the veil of ignorance.

We provide a microfoundation for a weighted utilitarian social welfare function that re ‡ects common moral intuitions about interpersonal comparisons of utilities. If utility is only ordinal, interpersonal comparisons are meaningless. Nonetheless, economics often adopts utilitarian welfare functions, assuming that comparable utility functions can be calibrated using information beyond consumer choice data. We show that consumer choice data alone are su¢cient. As suggested by Edgeworth (1881), just noticeable di¤erences provide a common unit of measure for interpersonal comparisons of utility di¤erences. We prove that a simple monotonicity axiom implies a weighted utilitarian aggregation of preferences, with weights proportional to individual jnd's. We thank Paul Milgrom, Philippe Mongin, Uzi Segal, and David Schmeidler for comments and discussions. We are particularly grateful to Luigi Balletta, Ludovic Renou, and an anonymous referee for comments on earlier versions of this paper and for important references. Gilboa gratefully acknowledges support from ISF Grants 204/13, 704/15, the Foerder Foundation, and ERC Grant 269754.

This paper investigates distributive justice using a fourfold experimental design: The ignorance and the risk scenarios are combined with the self-concern and the umpire modes. We study behavioral switches between self-concern and umpire mode and investigate the goodness of ten standards of behavior. In the ignorance scenario, subjects became on average less inequality averse as umpires. A within-subjects analysis shows that about one half became less inequality averse, one quarter became more inequality averse and one quarter left its behavior unchanged as umpires. In the risk scenario, subjects become on average more inequality averse in their umpire roles. A within-subjects analysis shows that half of them became more inequality averse, one quarter became less inequality averse, and one quarter left its behavior unchanged as umpires. As to the standards of behavior, several prominent ones (leximin, leximax, Gini, Cobb-Douglas) experienced but poor support, while expected utility, Boulding's hypothesis, the entropy social welfare function, and randomization preference enjoyed impressive acceptance. For the risk scenario, the tax standard of behavior joins the favorite standards of behavior.

Uncertainty is a Hydra-headed phenomenon in health care. From a physician's perspective there often is uncertainty (many degrees) with respect to diagnosis (and the reliability of the technologies needed to establish a diagnosis), prognosis (and the infinite variety of genetic, physiological, pharmacological, behavioral, technological, economic, and cultural factors that affect the outcome of prognostic judgments), 1 the appropriateness of a therapeutic intervention (perhaps related to medical disagreement as documented in Wennberg research (1973) on small area variations in medical practice), the likely effectiveness of a therapeutic intervention, the risk/ benefit ratio of a therapeutic intervention (potentially complicated by comorbid conditions), the likelihood of a patient complying with the behaviors needed to maximize the likelihood of a therapeutic outcome, the applicability of a clinical guideline to this patient in the clinic, the reliability of the evidence and research behind that guideline, the quality and reliability of other caregivers (formal and informal) whose effort is integral to the successful implementation of a therapeutic intervention, and, finally, the sheer randomness of natural events at various levels in the health care encounter. That is the background for this presentation. Our question, however, is this: How should we address all this uncertainty in the economic/ political context of having to do health care rationing, and in the ethical context of having to do that rationing justly? Our working assumption, very widely endorsed, is that the need for health care rationing is inescapable because we have only limited resources available 1 Smith et al. (2013) write: "The quest for prognostic certainty has been described by our colleague Dr. Faith Fitzgerald as the 'punctilious quantification of the amorphous.' In other words, no matter what we do, there will always be some uncertainty in prognosis." For an excellent overview of the sources and structure of uncertainty in medicine see Hatch (2016). For one model of how to address the problem of health care rationing in the context of medical uncertainty see Moreira (2011).

Uncertainty is a Hydra-headed phenomenon in health care. From a physician's perspective there often is uncertainty (many degrees) with respect to diagnosis (and the reliability of the technologies needed to establish a diagnosis), prognosis (and the infinite variety of genetic, physiological, pharmacological, behavioral, technological, economic, and cultural factors that affect the outcome of prognostic judgments), 1 the appropriateness of a therapeutic intervention (perhaps related to medical disagreement as documented in Wennberg research (1973) on small area variations in medical practice), the likely effectiveness of a therapeutic intervention, the risk/ benefit ratio of a therapeutic intervention (potentially complicated by comorbid conditions), the likelihood of a patient complying with the behaviors needed to maximize the likelihood of a therapeutic outcome, the applicability of a clinical guideline to this patient in the clinic, the reliability of the evidence and research behind that guideline, the quality and reliability of other caregivers (formal and informal) whose effort is integral to the successful implementation of a therapeutic intervention, and, finally, the sheer randomness of natural events at various levels in the health care encounter. That is the background for this presentation. Our question, however, is this: How should we address all this uncertainty in the economic/ political context of having to do health care rationing, and in the ethical context of having to do that rationing justly? Our working assumption, very widely endorsed, is that the need for health care rationing is inescapable because we have only limited resources available 1 Smith et al. (2013) write: "The quest for prognostic certainty has been described by our colleague Dr. Faith Fitzgerald as the 'punctilious quantification of the amorphous.' In other words, no matter what we do, there will always be some uncertainty in prognosis." For an excellent overview of the sources and structure of uncertainty in medicine see Hatch (2016). For one model of how to address the problem of health care rationing in the context of medical uncertainty see Moreira (2011).

In a Case Law regime Courts have more flexibility than in a Statute Law regime. Since Statutes are inevitably incomplete, this confers an advantage to the Case Law regime over the Statute Law one. However, all Courts rule ex-post, after most economic decisions are already taken. Therefore, the advantage of flexibility for Case Law is unavoidably paired with the potential for time-inconsistency. Under Case Law, Courts may be tempted to behave myopically and neglect ex-ante welfare because, ex-post, this may afford extra gains from trade for the parties currently in Court. The temptation to behave myopically is traded off against the effect of a Court's ruling, as a precedent, on the rulings of future Courts. When Case Law matures this temptation prevails and Case Law Courts succumb to the time-inconsistency problem. Statute Law, on the other hand pairs the lack of flexibility with the ability to commit in advance to a given (forward looking) rule. This solves the time-inconsistency problem afflicting the Case Law Courts. We conclude that when the nature of the legal environment is sufficiently heterogeneous and/or changes sufficiently often, the Case Law regime is superior: flexibility is the prevailing concern. By the same token, when the legal environment is sufficiently homogeneous and/or does not change very often, the Statute Law regime dominates: the ability to overcome the time-inconsistency problem is the dominant consideration.

We examine experimentally individual preferences for redistributions in the US, Italy, and Norway. Twenty-one subjects were assigned initial earnings from a discrete uniform distribution. The source of earnings was manipulated and depended either on luck or on individual relative performance in some tasks. All subjects chose a redistribution rate to be applied to group members' earnings. One choice was then randomly selected to determine final earnings. Four different experimental decisions altered whether subjects' choice applied only to others, thus making self-interest irrelevant (impartial decision), and the degree of information over one's earnings. Norwegian subjects demanded significantly higher levels of redistribution both in the impartial decision and when self-interest offered the most clear-cut prescription, as uncertainty over one's earnings was removed. The demands for redistributions by US and Italian participants were instead similar. Conversely, country differences disappeared in decisions where earnings were uncertain. Contrary to widely held views, no evidence was found that US subjects were more "meritocratic" than others. Italian subjects reacted the most to the source of inequality, decreasing demand for redistribution in Performance treatments compared to Luck treatments. While behaviour of subjects whose earnings were above the median level (the "rich") did not differ significantly across countries, large differences emerged for people below the median level (the "poor") in the fourth decision. Italian "poor" were agreeable to let the "rich" receive a large share of their earnings, particularly so in Performance treatments. Conversely, Norwegians "poor" demanded full earnings equalisation. The behaviour of US subjects fell between these two extremes. This evidence shows the existence of relevant crosscountry difference in demand for redistribution and opens new perspectives on what may be considered "fair" or "unfair" inequality in Western countries.

Studies of compensating discrimination (known in the U.S. as affirmative action) have not accounted for the role of envy. Yet envy affects utility. I consider the compensatingdiscrimination policies that individuals acknowledging envy would choose when behind a veil of ignorance. The institutional background for my study is India, where low castes have been provided with preferential access to public education and reserved public sector jobs. Although the Indian case is background, the conclusions apply more generally. I define envy as occurring when people with the same abilities have different incomes because of unequal education and employment opportunities. This is the case when, because of adverse discrimination, low-caste people are denied access to education and public-sector jobs, and also when, because of compensating discrimination, it is high-caste people who are correspondingly denied equal access. A benchmark case with neither adverse nor discriminatory discrimination i...

We conduct a simple lab experiment where 320 subjects make a series of incentivized choices on how to allocate a bonus within a small firm that affect themselves and four other group members. By varying the characteristics of the distributions, we can infer subject’s attitudes toward various types of inequalities and whether inequalities become acceptable when they meet Rawlsian justice principles. Using a within-subject design, individuals make the same binary choices both behind the veil of ignorance and when their relative position is revealed. Choosing behind the veil of ignorance relates to a situation where individuals are perfectly mobile between ranks, while mobility is restricted as soon as they redo the choices with their position being revealed. Moreover, rank is determined randomly for one half of the subjects (Control group) and through an effort-task for the other half (Treatment group). We find that when future rank is based on effort, subjects are more willing to acc...

Using a choice-experiment in the lab, we look at preferences over pairs of income distributions within small groups in a firm-like setting. Is one type of distribution capable of attracting votes unanimously? It turns out that Pareto-dominance is the most important choice criterion: in binary choices over two distributions, all subjects prefer larger inequality when it makes everyone weakly better off. This is true,no matter whether income distribution is based on merit or luck. Unanimity only breaks once subjects’ positions within the income distribution are fixed and known ex-ante. However, even then, 75% subjects prefer Pareto-dominant distributions. This suggests that efficiency motives are of primary importance, more so than the origin of inequality.

IVIE working papers o®er in advance the results of economic research under way in order to encourage a discussion process before sending them to scienti¯c journals for their¯nal publication. * We want to thank M. Maschler and J. M. Zarzuelo for their insightful comments. This research has been supported by the Training and Mobility of Researchers programme initiated by the European Commission, by the IVIE, and by the DGES of the Spanish Ministerio de Educaci ¶ on y Cultura, under project PB96-0247.

This paper surveys a recent body of research by Carneiro, Hansen, and Heckman (2001, 2003), Cunha and Heckman (2006), Cunha, Heckman, and Navarro (2005a,b, 2006), Heckman and Navarro (2006) and Navarro (2004) that estimates and identifies the ex post distribution of returns to schooling and determines ex ante distributions of returns on which agents base their schooling choices. We discuss methods and evidence, and state a fundamental identification problem concerning the separation of preferences, market structures and agent information sets. For a variety of market structures and preference specifications, we estimate that over 50% of the ex post variance in returns to college are forecastable at the time agents make their schooling choices.

Jason Brennan, who proposes assessing democratic decisions based on non-procedural expert knowledge from a pure utilitarian standpoint, holds a prominent position among libertarian critiques of democracy. Brennan contends that epistocratic regimes can outperform democracies since democracies perform badly due to the phenomena of rational ignorance and deliberative democratic methods cannot solve this problem. Brennan, who compares epistocratic institutions to constitutional institutions, wants to tame democracies using negative externality arguments. In this study, we demonstrate that constitutional democracies cannot be assessed by the Brennanian metrics and that epistocracy will erode the libertarian political successes of constitutional democracy. Two important arguments back up this conclusion. First, transforming libertarian ideals beyond constitutional rules into the standard for daily politics allows experts tremendous discretion. Even with good intentions, the unchecked discretion of experts would most likely undermine the general, abstract, and egalitarian rules required by a complex society. Second, taking the concept of rational choice out of its original context will make the distinction between constitutional and unconstitutional governments unclear. Therefore, the libertarian ideal of the limited government established by the separation of powers and the procedures of checks and balances would lose its significance, giving place to the unchecked discretion of expert rule.

Is taxation of capital income inefficient? And if so, why do democratic governments persist with such taxation? In this paper, we evaluate the likely impact of capital taxation in the United Kingdom. The theoretical argument displaying the overall inefficiency of capital ...

We describe and analyze a contractual environment that allows a role for an active court. The model we analyze is the same as in Anderlini, Felli, and Postlewaite (2006). An active court can improve on the outcome that the parties would achieve without it. The institutional role of the court is to maximize the parties' welfare under a veil of ignorance. In Anderlini, Felli, and Postlewaite (2006) the possibility of "menu contracts" between the informed buyer and the uninformed seller is described but not analyzed. Here, we fully analyze this case. We find that if we maintain the assumption that one of the potential objects of trade is not contractible ex-ante, the results of Anderlini, Felli, and Postlewaite (2006) survive intact. If however we let all "widgets" be contractible ex-ante, then multiple equilibria obtain. In this case the role for an active court is to ensure the inefficient pooling equilibria do not exist alongside the superior ones in which separation occurs.

In Part 1 of this series papers (Part 1 & Part 2 (Guo and Rega, 2020) [1]), a general operatorbased boundary analysis approach is proposed for free vibrations of coupled structural systems, with the new coupled modal frequencies and modal shapes being directly extracted in a systematic manner from the uncoupled components Green's functions. Therefore, adhoc remodelling of the whole augmented structural system is avoided. It turns out that a hybrid decomposition of the original coupled system into two sub-problems at the coupling interface, i.e., one excited kinematically at the boundary and the other excited by an interaction force in its interior domain, is of vital importance. Using general operator arguments and reciprocity-based operator equality, the dynamic coupling is imposed by combining the boundary kinematic effects and interaction force effects. The orthogonality of the coupled modal shapes is further established (and in Part 2 (Guo and Rega, 2020) [1] a general full interpretation of mode localization phenomenon will be presented). Finally, two coupled structural systems, i.e., string-oscillator and string-beam, are attacked by this operator formulation as examples, with coupled frequencies/modal shapes being obtained in a systematic way.

Another Look at the Identification at Infinity of Sample Selection Models * It is often believed that without instrument, endogenous sample selection models are identified only if a covariate with a large support is available (see Chamberlain, 1986, and Lewbel, 2007). We propose a new identification strategy mainly based on the condition that the selection variable becomes independent of the covariates when the outcome, not one of the covariates, tends to infinity. No large support on the covariates is required. Moreover, we prove that this condition is testable. We finally show that our strategy can also be applied to the identification of generalized Roy models.

It has long been known, from the work of Samuelson and Aaron, that if (approximately) the sum of the population and real earnings growth rates exceeds the real interest rate, all individuals can be made better o¡ by using a pay-as-you-go pension scheme. The basic overlapping generations model that is typically used to examine such intergenerational transfers makes no allowance for labour supply responses to taxes and transfers, and so cannot be used to examine optimal tax and pension levels. The present paper allows for labour supply e¡ects, whereby a tax imposed to ¢nance current pensions introduces distortions to labour supply and a reduction in the tax base. The optimal proportional tax rate, and therefore the optimal combination of private savings and social transfers, is derived in terms of the time preference rate, the taste for leisure, real interest and productivity and population growth rates. It is found that the condition under which the optimal tax is positive is the same as the Samuelson^Aaron condition. A crucial ingredient in obtaining this result is an assumption that pension levels are adjusted in line with the growth of wage rates rather than, for example, being held constant in real terms. This in turn is found to imply that earnings grow at the same rate as the wage, so long as preferences are such that leisure can be expressed as a proportion of full income.

Cette étude porte sur les quatre questions ayant trait à des opinions économiques posées lors de la dernière vague de l'enquête sur les valeurs des Européens (1999). Il en ressort que le libéralisme économique domine légèrement dans l'Union européenne. À certaines exceptions près, on le trouve plus fréquemment exprimé au Nord qu'au Sud ou à l'Ouest qu'à l'Est. Au-delà de cette diversité géographique, ces opinions tiennent à des différences idéologiques, de position sociale ou d'intérêt, mais elles sont également le fruit de raisons morales, et dès lors ce qui divise les Européens ne suffit pas à tout expliquer. Leurs attitudes dérivent aussi de l'effort pour s'accorder sur des principes raisonnables susceptibles de trouver l'assentiment de tous, en d'autres termes d'une recherche de justice sociale à laquelle une préséance est accordée et que l'on peut repérer en raisonnant comme derrière un « voile d'ignorance ». 1. Les données Pour se donner une définition de l'Europe, nous retiendrons tous les pays qui composent l'Union européenne en mai 2004. Chypre étant le seul pays dans lequel l'enquête n'a pas été effectuée, cela va nous conduire à faire porter cette étude sur un total de 24 pays : les 15 pays

This article addresses Rawls´s critique of utilitarianism in the framework of the discussion on the moral foundation of the principles of justice. It is shown the principle of utility lacks the necessary moral constraints that ensure both effective recognition among people and a fair distribution of the social bases of self-respect. Rawls's arguments against classical utilitarianism fall into two groups: first those who are independent of the contractual dimension of his theory, then those that are the result of the original position and the veil of ignorance. It is concluded that, given the relevance of the mutual recognition and self-respect for the establishment of a just society, the principle of utility cannot be a moral alternative for the organisation of the main social institutions

We experimentally investigated the effects of the possibility of taking in the dictator game and the choices of passive players between the dictator game and the taking game on the distribution decisions of active players. Our main findings support our hypothesis: when the dictator game is not exogenously given but chosen by the receivers (or passive players), this makes them accountable, which leads to less giving by dictators. We also conducted an online survey to gain further insights about our experimental results. Survey participants predicted most of the observed behavior in the experiment and explained the factors that might have driven the predicted behavior using reasoning similar to ours. Our results provide a new perspective for the dependence of giving in the dictator game on contextual factors.

В статье проанализированы три подхода к соотношению объективности и универсальности моральных требований и оценок: 1) объективность и универсальность независимы друг от друга; 2) универсальность является дополнительным свойством объективных требований и оценок; 3) объективность и универсальность выступают как две параллельных характеристики одного и того же свойства морали.

The question regarding the relationship between ethics and politics has always occupied the minds of philosophers and political theorists. Thomas Nagel is one philosopher among others who clearly draws a close link between the ethical and the political. Accordingly, Nagel's inquiry on the issues of objectivity and subjectivity is providing the readers not only with ethical but also political insights regarding the matter. On the other hand, John Rawls's ideas of an "original position" and a "veil of ignorance" in their relation to his understanding of political justice, similarly, interrogate the possibility of an alternative perspective for an objective standpoint that recognizes and encompasses individuality while offering a model for a political community which is founded upon impartial principles. Although Rawls's discussion is mainly contractual and strictly political, certain aspects of his works on political justice and liberalism might be reconsidered in an investigation which also engages with issues in morality and ethics. Therefore, the present study will attempt at reading Nagel's discussion of objectivity and impartiality from an ethico-political standpoint which juxtaposes 'the view from nowhere' with Rawlsian "veil of ignorance". For this, relevant arguments of both philosophers will be explored in a comparative manner while highlighting potential parallelisms between the two.

La finalidad principal de este artículo es comparar y confrontar dos corrientes dentro de la filosofía jurídica contemporánea cuyo interés subyacente parece ser el mismo: el de la cuestión de la legitimidad política. Estas corrientes son, por una parte, la derivada de la Justicia como equidad formulada por John Rawls, y por otra la denominada recientemente como constitucionalismo popular. Con dicho fin, en primer lugar se realiza un esbozo del constitucionalismo popular, señalando cuáles son sus principales objetivos y características, y, más concretamente, cómo pretende devolver la soberanía a su titular legítimo, «el pueblo mismo». Una vez hecho esto, se exponen las razones que justifican relacionar dos propuestas aparentemente tan diversas con la finalidad de fijar el vínculo entre ambas: quién toma parte en la elaboración del acuerdo consituyente y cómo luchar contra cualquier usurpación del mismo. El artículo señala a continuación las principales diferencias que se dan en lo qu...

In this paper I will juxtapose the concept of the veil of ignorance-a fundamental premise of Rawlsian justice as fairness-and solidarity in the context of the organisation of a healthcare system. My hypothesis is that the veil of ignorance could be considered a rhetorical tool that supports compassion solidarity. In the concept of the veil of ignorance, I will find some crucial features of compassion solidarity within the Rawlsian concept of "reciprocity" (actually, not being reciprocity at all)-located between "impartiality" and "mutual advantage". I conclude that, even behind this "thick" veil, some essential, yet "particular" facts on health and wealth redistribution are available to decision makers. Lastly, I discover that by means of the assumption of self-interest in the original position the veil aims to convert egoism into empathy, thus invoking the solidarity of compassion that in turn could be translated into principles of the organisation of a healthcare system.

Can unanimous (or nearly so) agreement be reached by members of a diverse community on a system of justice in distribution used to guide the re-distribution of endowments within this community? Arrow’s impossibility result suggests that this question will receive a negative answer if certain conditions are imposed on the procedures that a community employs in the attempt to make important community decisions. These conditions are reconsidered by allowing for various types of under-insured risk and uncertainty that face members of communities—especially communities in developing countries. Next, two types of uncertainty are allowed for in the designs of various game-theoretic experiments to determine if groups of individuals can come to agree unanimously on a single system of justice in distribution. (These experiments are based on those devised by Frohlich, Oppenheimer and Eavey, and Frohlich and Oppenheimer.) The participants in these experiments are asked to choose one out of four...

This paper uses a signaling game model to address the debate between limited liability rule and unlimited liability rule in the context of the case of Hadley v Baxendale (1854). This paper compares the levels of net social surplus obtained by the two legal rules under different sets of parameter values. The parameters investigated are the level of transaction cost in communicating the private information regarding the valuation of the contract, the proportion of low valuation versus high valuation promisees, the extra cost of achieving a high performance of contract relative to a low performance by promisors and, the gap between high valuation and low valuation of contract performance. The paper finds that the optimal liability rule depends on the parameter values. When there are many low valuation promisees and transaction cost is low, limited liability rule is better. When there are many low valuation promisees and transaction cost is high, both rules perform equally well. When there are many high valuation promisees, unlimited rule is better irrespective of the level of transaction cost. Finally, when there is high valuation differential relative to performance cost differential, the set of parameter values under which the unlimited rule performs better becomes larger.

We analyze the relationship between legal institutions, innovation and growth. We compare a rigid (law set ex-ante) legal system and a flexible one (law set after observing current technology). The flexible system dominates in terms of welfare, amount of innovation and output growth at intermediate stages of technological development-periods when legal change is needed. The rigid system is preferable at early stages of technological development, when (lack of) commitment problems are severe. For mature technologies the two legal systems are equivalent. We find that rigid legal systems may induce excessive (greater than first-best) R&D investment and output growth.

We study a contracting model with unforeseen contingencies in which the court is an active player. Ex-ante, the contracting parties cannot include the risky unforeseen contingencies in the contract they draw up. Ex-post the court observes whether an unforeseen contingency occurred, and decides whether to void or uphold the contract. If the contract is voided by the court, the parties can renegotiate a new agreement ex-post. There are two effects of a court that voids more contracts. The parties' incentives to undertake relationship-specific investment are reduced, while the parties enjoy greater insurance againt the unforeseen contingencies which the ex-ante contract cannot take into account. In this context, we are able to characterise fully the optimal decision rule for the court. The behaviour of the optimal court is determined by the trade-off between the need for incentives and the gains from insurance that voiding in some circumstances offers to the agents.

We analyze the relationship between legal institutions, innovation and growth. We compare a rigid (law set ex-ante) legal system and a flexible one (law set after observing current technology). The flexible system dominates in terms of welfare, amount of innovation and output growth at intermediate stages of technological development-periods when legal change is needed. The rigid system is preferable at early stages of technological development, when (lack of) commitment problems are severe. For mature technologies the two legal systems are equivalent. We find that rigid legal systems may induce excessive (greater than first-best) R&D investment and output growth.

We analyze the efficiency and consistency of court decisions under common and civil law. As a leading example, we study the enforcement of property rights. Judges are of two types: some are conservative and follow the precedent or the statute, while others maximize social welfare. When courts intervene ex-post, after the relevant economic choices have been made, welfare-maximizing courts face a "commitment problem." Such an ex-post bias has implications on the relative "consistency" and efficiency of each legal system. Surprisingly, we find that court decisions are more consistent under common law than under civil law. The welfare comparison between the two systems is, instead, ambiguous. However, in changing economic environments, common law is more likely to dominate civil law because of its greater adaptability.

We find an economic rationale for the common sense answer to the question in our title-courts (that maximize the parties' welfare under a veil of ignorance) should not always enforce what the contracting parties write. Courts can improve on the outcome that the parties would achieve without their intervention. We study a buyer-seller model with risk-neutral agents and asymmetric information. The court must decide when to uphold a contract and when to void it. The parties know their private information at the time of contracting, and this drives a wedge between ex-ante and interim-efficient contracts. In particular, if the court enforces all contracts, inefficient pooling obtains in equilibrium. By voiding some contracts the court is able to induce them to separate, and hence improve ex-ante welfare. Our results can also be interpreted as supporting the normative case for mandatory rules in contract law.

This paper explores the link between boundedly rational behavior and incomplete contracts. The bounded rationality of the agents in our world is embodied in a constraint that the contracts they write must be algorithmic in nature. We start with a definition of contract incompleteness that seems both appealing and widely applicable. Our first task is then to show that, by itself, the algorithmic nature of contracts is not enough to generate genuinely incomplete contracts in equilibrium. As in Anderlini and Felli (1994), we call this the Approximation Result. We then proceed to consider contractual situations in which the complexity costs of a contract are explicitly taken into account. We consider a broad (axiomatically defined) class of complexity measures and in this framework we show that incomplete contracts obtain in equilibrium. We also discuss extensively some recent literature directly related to the results reported here.

We describe and analyze a contractual environment that allows a role for an active court. The model we analyze is the same as in Anderlini, Felli, and Postlewaite (2006). An active court can improve on the outcome that the parties would achieve without it. The institutional role of the court is to maximize the parties' welfare under a veil of ignorance. In Anderlini, Felli, and Postlewaite (2006) the possibility of "menu contracts" between the informed buyer and the uninformed seller is described but not analyzed. Here, we fully analyze this case. We find that if we maintain the assumption that one of the potential objects of trade is not contractible ex-ante, the results of Anderlini, Felli, and Postlewaite (2006) survive intact. If however we let all "widgets" be contractible ex-ante, then multiple equilibria obtain. In this case the role for an active court is to ensure the inefficient pooling equilibria do not exist alongside the superior ones in which separation occurs.

In a Case Law regime Courts have more flexibility than in a Statute Law regime. Since Statutes are inevitably incomplete, this confers an advantage to the Statute Law regime over the Case Law one. However, all Courts rule ex-post, after most economic decisions are already taken. Therefore, the advantage of flexibility for Case Law is unavoidably paired with the potential for time-inconsistency. Under Case Law, Courts may be tempted to behave myopically and neglect ex-ante welfare because, ex-post, this may afford extra gains from trade for the parties currently in Court. The temptation to behave myopically is traded off against the effect of a Court's ruling, as a precedent, on the rulings of future Courts. When Case Law matures this temptation prevails and Case Law Courts succumb to the time-inconsistency problem. Statute Law, on the other hand pairs the lack of flexibility with the ability to commit in advance to a given (forward looking) rule. This solves the time-inconsistency problem afflicting the Case Law Courts. We conclude that when the nature of the legal environment is sufficiently heterogeneous and/or changes sufficiently often, the Case Law regime is superior: flexibility is the prevailing concern. By the same token, when the legal environment is sufficiently homogeneous and/or does not change very often, the Statute Law regime dominates: the ability to overcome the time-inconsistency problem is the dominant consideration.