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Journal of Economics and Finance

Erschienen in:

19.09.2017

Utilitarian preference for redistribution: a concern with max-min

verfasst von: George A. Waters

Erschienen in: Journal of Economics and Finance | Ausgabe 2/2018

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Abstract

This paper studies an optimal linear tax or basic income regime with an extensive margin in the supply of labor and a utililitarian welfare criterion. The presence the extensive margin in labor supply breaks the connection between allocational efficiency and aggregate utility maximization. In a general framework, some redistribution maximizes aggregate utility, but a lesser degree than what Rawls’ max-min criterion would require. Rawls’ concept of the Original Position is useful, but the rationality of the max-min criterion is questionable.

Vorheriger Artikel Forecasting inflation in post-oil boom years: A case for regime switches?

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Rawls (1958) describes the concept. Harsanyi (1955) discusses a formal represention.

Also, the model presented here has an explicit production sector, unlike some of the models described in Piketty and Saez (2013).

Friedman (1962) presents the negative income tax as a fixed deduction from wages that are taxed, which is equivalent to the regime here for any given tax rate. See also http://www.basicincome.org/bien/.

Having an interior solution is not a sufficient condition for welfare to be maximized at τ = 0, but Stiglitz (2009) shows that it is the case for a lognormal distribution of wages in the absence of public goods.

See Stiglitz (1987) and Piketty and Saez (2013) for a full discussion.

Piketty and Saez (2013) note that this concept can be traced to Jules Depuit.

This condition can be recovered by integrating the household budget constraint as well.

In related, though more restrictive, models, Stiglitz (1987) and Piketty and Saez (2013) demonstrate a simple formula for level of taxation that maximizes aggregate utility.

Atkinson AB (1973) Minimax and optimal income taxation. Discussion Paper no. 47, University of Essex Department of Economics

Diamond P (1980) Income taxation with fixed hours of work. J Publ Econ 13:101–110CrossRef

Dixit AK, Sandmo A (1977) Some simplified formulae for optimal income taxation. Scand J Econ 79(4):417–423CrossRef

Friedman M (1962) Capitalism and freedom. University of Chicago Press, Chicago

Harsanyi J (1955) Cardinal welfare, individualistic ethics, and interpersonal comparisons of utility. J Politi Econ 63(4):309–321CrossRef

Jackson S (1948) The lottery. In: The New Yorker

Manski C (2014) Choosing size of government under ambiguity: infrastructure spending and income taxation. Econ J 124(576):359–376CrossRef

Mirlees JA (1971) An exploration in the theory of optimal income taxation. Rev Econ Stud 38:135–208

Nagel T (1973) Rawls on justice. Philos Rev 82(2):220–234CrossRef

Piketty T, Saez E (2013) Optimal labor income taxation with Thomas Piketty. In: The n, vol 5, pp 391–474

Rawls J (1958) Justice as fairness. Philos Rev 67(2):164–194CrossRef

Rawls J (1971) A theory of justice. Harvard University Press, Cambridge

Scanlon T (1973) Rawls’ theory of justice. In: Daniels N (ed) Reading Rawls. Basic Books, New York, p 1989

Stiglitz J (1982) Self-selection and Pareto efficient taxation. J Publ Econ 17:213–240CrossRef

Stiglitz J (1987) Pareto efficient and optimal taxation and the new welfare economics. In: Auerbach A J, Feldstein M (eds) Handbook of public economics, chapter 15, vol 2. North-Holland, Amsterdam, pp 991–1042

Stiglitz J (2009) Simple formulae for optimal income taxation and the measurement of inequality: an essay in honor of Amartya Sen. Oxford online scholarship. https://doi.org/10.1093/acprof:oso/9780199239115.001.0001

Werning I (2007) Pareto efficient income taxation, working paper

Titel: Utilitarian preference for redistribution: a concern with max-min
verfasst von: George A. Waters
Publikationsdatum: 19.09.2017
Verlag: Springer US
Erschienen in: Journal of Economics and Finance / Ausgabe 2/2018
Print ISSN: 1055-0925
Elektronische ISSN: 1938-9744
DOI: https://doi.org/10.1007/s12197-017-9413-y

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