Distributive Justice and the Comparison of Legal Rules: Quantify the 'Price of Equity'

Rotterdam Institute of Law and Economics (RILE) Working Paper Series No. 2013/01

44 Pages Posted: 13 Mar 2013 Last revised: 28 Jan 2016

See all articles by Marco Fabbri

Marco Fabbri

University of Amsterdam - Faculty of Law

Diogo Britto

Catholic University of Milan

Date Written: March 9, 2013

Abstract

This paper proposes a quantitative approach to study two methodological problems arising when alternative legal rules are compared: a) aggregating individual into social preferences and b) choosing the object of maximization.

We consider a redistribution policy that reduces inequality but diminishes total wealth and we specify a set of social welfare functions combining different preferences aggregation methods and maximands. For each social welfare function, we calculate its “price of equity”, defined as the maximum fraction of total wealth that a society is willing to sacrifice in order to implement the redistribution.

Comparing the prices for equity across different social welfare function specifications, we identify systematic relationships and we rank them according to the efficiency-equity orientation. Results show that social welfare functions characterized by aggregation methods conventionally considered equity-oriented may reject redistribution policies that are evaluated as welfare-improving by social welfare functions using efficiency-oriented aggregation methods.

Similarly, social welfare functions considered equity-oriented because using utility as object of maximization may reject distributive policies that are evaluated as welfare-improving by social welfare functions using wealth as maximand.

We argue that a quantitative approach, by expounding the trade-off between equity and efficiency connected to different social welfare functions, may prove useful for rule-makers engaging in the choice of a normative criterion for the evaluation of social welfare.

Keywords: Distributive Justice, Policy, Law and Economics, Social Welfare Function

JEL Classification: D61, D63, D78, K10

Suggested Citation

Fabbri, Marco and Britto, Diogo, Distributive Justice and the Comparison of Legal Rules: Quantify the 'Price of Equity' (March 9, 2013). Rotterdam Institute of Law and Economics (RILE) Working Paper Series No. 2013/01 . Available at SSRN: https://ssrn.com/abstract=2232220 or http://dx.doi.org/10.2139/ssrn.2232220

Marco Fabbri (Contact Author)

University of Amsterdam - Faculty of Law ( email )

Amsterdam, 1018 WB
Netherlands

HOME PAGE: http://https://sites.google.com/site/alfamarcofabbri/

Diogo Britto

Catholic University of Milan ( email )

Largo Gemelli 1
Milan, Milano 20123
Italy

HOME PAGE: http://sites.google.com/site/diogobrittoecon/

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