New published paper: Fairness and the proportionality principle
How should you distribute income so that you keep the fair inequalities (that derive from the freedom to choose), but not the unfair inequalities (that dervie from difference in opportunities)? Cappelen and Tungodden writes in Social Choice and Welfare.
Fair and unequal
How should income be distributed so it respects both the egalitarian ideal that inequalities due to differences in opportunities should be eliminated, and the liberal ideal that people should be free to pursue their own idea of the good life without interference from society? Alexander Cappelen and Bertil Tungodden propose a new answer to this question in their paper "Fairness and the proportionality principle", which is published in the present issue of the journal Social Choice and Welfare. In the paper, Cappelen and Tungodden demonstrate that the generalized proportionality principle, closely related to principles suggested by Bossert (1995) and Konow (1996), satisfies both the egalitarian ideal of equalization and the liberal ideal of neutrality.
Generalized proportionality principle
Inequalities in earned income are a result of differences in both the opportunities people have and the choices they make. A theory of distributive justice needs to address how society should handle such inequalities. The liberal egalitarian theories of distributive justice answer this question by combining the egalitarian ideal that inequalities due to differences in opportunities should be eliminated, and the liberal ideal that people should be free to pursue their own idea of the good life without interference from society. A key challenge for a liberal egalitarian redistribution mechanism is therefore how to eliminate income inequalities due to differences in opportunities and at the same time preserve income inequalities due to choice.
Reasonable interpretations of the egalitarian and the liberal ideal characterize as the generalized proportionality principle. This principle states that an individual should have the share of total income that he or she would have had if everyone had the same opportunities and these opportunities were given by the average of the pre-tax income functions of all individuals in society. Cappelen and Tungodden argue that a redistribution mechanism based on this principle would eliminate unfair inequalities and preserve fair inequalities, and discuss when the generalized proportionality principle is equivalent to the simple proportionality principle.
Almås et al. (2011) show how the generalized proportionality principle can be used to measure unfair inequality in a population, both pre-tax and post-tax, and demonstrate that such an approach may give a very different picture of the development in inequality in Norway than more standard inequality measures.