Economics Seminar（2015-21）

Topic:Equity versus Equality: Experimental Analysis of Justice Rules

Speaker:James Konow,Kiel University

Time: Wednesday, Dec. 16 from 10:00-11:30am

Location: Room 216, Guanghua Building 2

Abstract:

Rising inequality in the distribution of income and wealth in the US and other countries over the last several decades has prompted academic research into its causes and effects as well as broader discussions that reflect concerns of society regarding these developments. Although these concerns tap into a common sentiment that the current levels of inequality are unfair, they do not necessarily imply that all inequalities are unfair and leave open the question of what distribution of income or wealth is fair. In fact, despite a considerable volume of research on distributive justice, there is still no consensus about what distributive rule best represents justice, not only among economists, but among social scientists and philosophers, in general. This presentation focuses on empirical methods aimed at describing popular fairness preferences, as opposed to approaches in philosophy and normative economic theory, which involve prescriptive analysis of justice. In the empirical social science research, the two main contenders fairness rules areequalityandequity. Equality simply calls for equal allocations of rewards (or burdens) among individuals. Equity, as it is often employed in the social sciences and as I will use it here, entails inequality. A descriptively powerful version calls for allocation of rewards in proportion to the contributions individual control, e.g., paying twice as much to the worker who produces twice as much because of effort (as opposed, say, to talent).This presentation describes two experimental studies that investigate preferences forequality and equity.The first is a laboratory experiment conducted in the US and Japan that explores various forces that influence whether preferences tend toward equality or equity. The second study is a natural field experiment conducted in Ethiopia that examines whether experience with equal or equitable rewards affects whether people prefer equality or equity.

Rising inequality in the distribution of income and wealth in the US and other countries over the last several decades has prompted academic research into its causes and effects as well as broader discussions that reflect concerns of society regarding these developments. Although these concerns tap into a common sentiment that the current levels of inequality are unfair, they do not necessarily imply that all inequalities are unfair and leave open the question of what distribution of income or wealth is fair. In fact, despite a considerable volume of research on distributive justice, there is still no consensus about what distributive rule best represents justice, not only among economists, but among social scientists and philosophers, in general. This presentation focuses on empirical methods aimed at describing popular fairness preferences, as opposed to approaches in philosophy and normative economic theory, which involve prescriptive analysis of justice. In the empirical social science research, the two main contenders fairness rules areequalityandequity. Equality simply calls for equal allocations of rewards (or burdens) among individuals. Equity, as it is often employed in the social sciences and as I will use it here, entails inequality. A descriptively powerful version calls for allocation of rewards in proportion to the contributions individual control, e.g., paying twice as much to the worker who produces twice as much because of effort (as opposed, say, to talent).This presentation describes two experimental studies that investigate preferences forequality and equity.The first is a laboratory experiment conducted in the US and Japan that explores various forces that influence whether preferences tend toward equality or equity. The second study is a natural field experiment conducted in Ethiopia that examines whether experience with equal or equitable rewards affects whether people prefer equality or equity.

Rising inequality in the distribution of income and wealth in the US and other countries over the last several decades has prompted academic research into its causes and effects as well as broader discussions that reflect concerns of society regarding these developments. Although these concerns tap into a common sentiment that the current levels of inequality are unfair, they do not necessarily imply that all inequalities are unfair and leave open the question of what distribution of income or wealth is fair. In fact, despite a considerable volume of research on distributive justice, there is still no consensus about what distributive rule best represents justice, not only among economists, but among social scientists and philosophers, in general. This presentation focuses on empirical methods aimed at describing popular fairness preferences, as opposed to approaches in philosophy and normative economic theory, which involve prescriptive analysis of justice. In the empirical social science research, the two main contenders fairness rules areequalityandequity. Equality simply calls for equal allocations of rewards (or burdens) among individuals. Equity, as it is often employed in the social sciences and as I will use it here, entails inequality. A descriptively powerful version calls for allocation of rewards in proportion to the contributions individual control, e.g., paying twice as much to the worker who produces twice as much because of effort (as opposed, say, to talent).This presentation describes two experimental studies that investigate preferences forequality and equity.The first is a laboratory experiment conducted in the US and Japan that explores various forces that influence whether preferences tend toward equality or equity. The second study is a natural field experiment conducted in Ethiopia that examines whether experience with equal or equitable rewards affects whether people prefer equality or equity.

To the extent people act according to equity, it seems to be because of a preference for it. With equality, on the other hand, there is ambiguity: various arguments have been advanced for equality. The first study is a joint undertaking with Japanese colleagues, which examines competing conjectures about distributive preferences with the use of a laboratory experiment and with a subject pool of US and Japanese subjects. The egalitarian view takes equality as an absolute goal, although there remains uncertainty about what one should equalize, e.g., goods, income, wealth, happiness, health, etc. Another view is that equality sometimes serves as a kind of default, e.g., people resort to equal splits when they lack the information needed to justify unequal allocations on the basis of more general principles like equity.Some researchers, especially in cultural psychology, point to cultural factors, e.g., some claim there is an Eastern preference for equality that is opposed to a Western preference for equity. There is the question of the size of the stakes involved, e.g., friends might split the tab at a restaurant, unless there are large and costly differences in what each person consumed. There might be gender or other demographic differences in fairness preferences. This study considers these factors and introduces consideration of an additional factor: how personal the relationship is between affected parties, i.e., do they stand in a personal relationship to one another, and, if so, how personal? For example, suppose people agree that it is fair for the more productive worker to earn considerably more than the less productive one; nevertheless, co-workers who work closely mightagree to more equal compensation than that justified by productivity differences alone.

Whereas the first study examines the dependence of equality-equity preferences on various contextual factors, the second study explores whether experience affects the relative weight people attach to equality or equity. It is a joint project with colleagues at the University of Gothenburg, which involves a field experiment with Ethiopian workers that considers whether workers who have been compensated equally have different fairness preferences from equivalent workers who have been compensated equitably (i.e., in proportion to individual effort and performance). Specifically, this study examines the productivity levels of workers over the course of a two week work project. In the first week, subjects are paired into one low productivity and one high productivity worker. Moreover, there are two groups or treatments: each pair in one group is paid equally and, in a second group, each subject in each pair is paid in proportion to individual performance, i.e., the second group is paid equitably. In the second week, pairs in both groups are paid equally. If the experience of different pay regimes in the first week affected workers’ fairness preferences, then,based on theory, we would expect to observe specific differences in productivity between the equal and equitable groups in the second week when both are paid equally. Specifically, if subjects develop a fairness preference for the pay regime they experienced in the first week, then the predictions for the second week are that 1) low productivity workers in the equitable group will work harder than those in the equal group, and 2) high productivity workers in the equal group will work harder than those in the equitable group. Moreover, we include post-experimental questionnaires that examine possible differences between the two groups about what kind of pay they consider fair.The typical pay scheme for this kind of work in Ethiopia is neither equal nor equitable but fixed per hour independent of performance, so we also ran a third control for one week under a fixed pay scheme.

The results of these studies provide evidence that fairness preferences include both equity and equality and also indicate which factors matter to the relative importance of these rules and which do not. Fairness views are affected by how personal the relationship between individuals is, how large the stakes are, and what the experience is of subjects with past reward schemes. Moreover, the evidence shows the results are robust with respect to demographic characteristics, including nationality, culture, gender and race.

Rising inequality in the distribution of income and wealth in the US and other countries over the last several decades has prompted academic research into its causes and effects as well as broader discussions that reflect concerns of society regarding these developments. Although these concerns tap into a common sentiment that the current levels of inequality are unfair, they do not necessarily imply that all inequalities are unfair and leave open the question of what distribution of income or wealth is fair. In fact, despite a considerable volume of research on distributive justice, there is still no consensus about what distributive rule best represents justice, not only among economists, but among social scientists and philosophers, in general. This presentation focuses on empirical methods aimed at describing popular fairness preferences, as opposed to approaches in philosophy and normative economic theory, which involve prescriptive analysis of justice. In the empirical social science research, the two main contenders fairness rules areequalityandequity. Equality simply calls for equal allocations of rewards (or burdens) among individuals. Equity, as it is often employed in the social sciences and as I will use it here, entails inequality. A descriptively powerful version calls for allocation of rewards in proportion to the contributions individual control, e.g., paying twice as much to the worker who produces twice as much because of effort (as opposed, say, to talent).This presentation describes two experimental studies that investigate preferences forequality and equity.The first is a laboratory experiment conducted in the US and Japan that explores various forces that influence whether preferences tend toward equality or equity. The second study is a natural field experiment conducted in Ethiopia that examines whether experience with equal or equitable rewards affects whether people prefer equality or equity.

CV

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