Justice (economics)
Encyclopedia
Justice in economics
is a subcategory of welfare economics
with models frequently representing
the ethical-social requirements of a given theory. That theory may or may not elicit acceptance. In the Journal of Economic Literature
classification codes 'justice' is scrolled to at JEL: D63, wedged on the same line between 'Equity
' and 'Inequality
' along with 'Other Normative Criteria and Measurement'. Categories above and below the line are Externalities and Altruism
.
In early welfare economics, where mentioned, 'justice' was little distinguished from maximization of all individual utility functions
or a social welfare function
. As to the latter, this need not slight an ordinary notion of justice. Paul Samuelson
(1947) describes a social welfare function (or social ordering) as representing any ethical belief system required to order any (hypothetically feasible) social states for the entire society as "better than," "worse than," or "indifferent to" each other. Utility maximization also survives, even with the rise of ordinal-utility
theory, as an ethical basis for economic-policy
judgments in the wealth-maximization criterion invoked in law and economics
.
Amartya Sen
(1970) and others have considered ways in which utilitarianism
as an approach to justice is constrained or challenged by independent claims of equality in the distribution
of primary goods, liberty, and entitlements, or opportunity exclusion of antisocial preferences, possible capabilities
, and fairness as non-envy
plus Pareto efficiency
. Alternate approaches have treated combining concern for the worst off with economic efficiency, the notion of personal responsibility and (de)merits of leveling individual benefits downward, and claims of intergenerational justice.
In the recent literature, a broad reinterpretation of justice from the perspective of game theory
, social contract theory
, and evolution
ary naturalism
is found in works of Ken Binmore (1994, 1998, 2004). Arguments on fairness as an aspect of justice have been invoked to explain a wide range of behavioral and theoretical applications, supplementing earlier emphasis on economic efficiency (Konow, 2003).
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
is a subcategory of welfare economics
Welfare economics
Welfare economics is a branch of economics that uses microeconomic techniques to evaluate economic well-being, especially relative to competitive general equilibrium within an economy as to economic efficiency and the resulting income distribution associated with it...
with models frequently representing
Mathematical problem
A mathematical problem is a problem that is amenable to being represented, analyzed, and possibly solved, with the methods of mathematics. This can be a real-world problem, such as computing the orbits of the planets in the solar system, or a problem of a more abstract nature, such as Hilbert's...
the ethical-social requirements of a given theory. That theory may or may not elicit acceptance. In the Journal of Economic Literature
Journal of Economic Literature
The Journal of Economic Literature is a peer-reviewed academic journal on economy published by the American Economic Association. It was established in 1963 as the Journal of Economic Abstracts. As a review journal, it mainly features essays and reviews of recent economic theories...
classification codes 'justice' is scrolled to at JEL: D63, wedged on the same line between 'Equity
Equity (economics)
Equity is the concept or idea of fairness in economics, particularly as to taxation or welfare economics. More specifically it may refer to equal life chances regardless of identity, to provide all citizens with a basic minimum of income/goods/services or to increase funds and commitment for...
' and 'Inequality
Economic inequality
Economic inequality comprises all disparities in the distribution of economic assets and income. The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among countries. The issue of economic inequality is related to the ideas of...
' along with 'Other Normative Criteria and Measurement'. Categories above and below the line are Externalities and Altruism
Altruism
Altruism is a concern for the welfare of others. It is a traditional virtue in many cultures, and a core aspect of various religious traditions, though the concept of 'others' toward whom concern should be directed can vary among cultures and religions. Altruism is the opposite of...
.
In early welfare economics, where mentioned, 'justice' was little distinguished from maximization of all individual utility functions
Utility
In economics, utility is a measure of customer satisfaction, referring to the total satisfaction received by a consumer from consuming a good or service....
or a social welfare function
Social welfare function
In economics, a social welfare function is a real-valued function that ranks conceivable social states from lowest to highest. Inputs of the function include any variables considered to affect the economic welfare of a society...
. As to the latter, this need not slight an ordinary notion of justice. Paul Samuelson
Paul Samuelson
Paul Anthony Samuelson was an American economist, and the first American to win the Nobel Memorial Prize in Economic Sciences. The Swedish Royal Academies stated, when awarding the prize, that he "has done more than any other contemporary economist to raise the level of scientific analysis in...
(1947) describes a social welfare function (or social ordering) as representing any ethical belief system required to order any (hypothetically feasible) social states for the entire society as "better than," "worse than," or "indifferent to" each other. Utility maximization also survives, even with the rise of ordinal-utility
Ordinal utility
Ordinal utility theory states that while the utility of a particular good or service cannot be measured using a numerical scale bearing economic meaning in and of itself, pairs of alternative bundles of goods can be ordered such that one is considered by an individual to be worse than, equal to,...
theory, as an ethical basis for economic-policy
Economic policy
Economic policy refers to the actions that governments take in the economic field. It covers the systems for setting interest rates and government budget as well as the labor market, national ownership, and many other areas of government interventions into the economy.Such policies are often...
judgments in the wealth-maximization criterion invoked in law and economics
Law and economics
The economic analysis of law is an analysis of law applying methods of economics. Economic concepts are used to explain the effects of laws, to assess which legal rules are economically efficient, and to predict which legal rules will be promulgated.-Relationship to other disciplines and...
.
Amartya Sen
Amartya Sen
Amartya Sen, CH is an Indian economist who was awarded the 1998 Nobel Prize in Economic Sciences for his contributions to welfare economics and social choice theory, and for his interest in the problems of society's poorest members...
(1970) and others have considered ways in which utilitarianism
Utilitarianism
Utilitarianism is an ethical theory holding that the proper course of action is the one that maximizes the overall "happiness", by whatever means necessary. It is thus a form of consequentialism, meaning that the moral worth of an action is determined only by its resulting outcome, and that one can...
as an approach to justice is constrained or challenged by independent claims of equality in the distribution
Distribution (economics)
Distribution in economics refers to the way total output, income, or wealth is distributed among individuals or among the factors of production .. In general theory and the national income and product accounts, each unit of output corresponds to a unit of income...
of primary goods, liberty, and entitlements, or opportunity exclusion of antisocial preferences, possible capabilities
Capability approach
The capability approach was initially conceived in the 1980s as an approach to welfare economics....
, and fairness as non-envy
Envy-free
In mathematical sociology and especially game theory, envy-free is a property of certain fair division algorithms for a divisible heterogeneous good over which different players may have different preferences....
plus Pareto efficiency
Pareto efficiency
Pareto efficiency, or Pareto optimality, is a concept in economics with applications in engineering and social sciences. The term is named after Vilfredo Pareto, an Italian economist who used the concept in his studies of economic efficiency and income distribution.Given an initial allocation of...
. Alternate approaches have treated combining concern for the worst off with economic efficiency, the notion of personal responsibility and (de)merits of leveling individual benefits downward, and claims of intergenerational justice.
In the recent literature, a broad reinterpretation of justice from the perspective of game theory
Game theory
Game theory is a mathematical method for analyzing calculated circumstances, such as in games, where a person’s success is based upon the choices of others...
, social contract theory
A Theory of Justice
A Theory of Justice is a book of political philosophy and ethics by John Rawls. It was originally published in 1971 and revised in both 1975 and 1999. In A Theory of Justice, Rawls attempts to solve the problem of distributive justice by utilising a variant of the familiar device of the social...
, and evolution
Evolution
Evolution is any change across successive generations in the heritable characteristics of biological populations. Evolutionary processes give rise to diversity at every level of biological organisation, including species, individual organisms and molecules such as DNA and proteins.Life on Earth...
ary naturalism
Naturalism (philosophy)
Naturalism commonly refers to the philosophical viewpoint that the natural universe and its natural laws and forces operate in the universe, and that nothing exists beyond the natural universe or, if it does, it does not affect the natural universe that we know...
is found in works of Ken Binmore (1994, 1998, 2004). Arguments on fairness as an aspect of justice have been invoked to explain a wide range of behavioral and theoretical applications, supplementing earlier emphasis on economic efficiency (Konow, 2003).
See also
- Cost-benefit analysisCost-benefit analysisCost–benefit analysis , sometimes called benefit–cost analysis , is a systematic process for calculating and comparing benefits and costs of a project for two purposes: to determine if it is a sound investment , to see how it compares with alternate projects...
- Deadweight lossDeadweight lossIn economics, a deadweight loss is a loss of economic efficiency that can occur when equilibrium for a good or service is not Pareto optimal...
- Distribution (economics)Distribution (economics)Distribution in economics refers to the way total output, income, or wealth is distributed among individuals or among the factors of production .. In general theory and the national income and product accounts, each unit of output corresponds to a unit of income...
- Distributive justiceDistributive justiceDistributive justice concerns what some consider to be socially just allocation of goods in a society. A society in which incidental inequalities in outcome do not arise would be considered a society guided by the principles of distributive justice...
- Constitutional economicsConstitutional economicsConstitutional economics is a research program in economics and constitutionalism that has been described as extending beyond the definition of 'the economic analysis of constitutional law' in explaining the choice "of alternative sets of legal-institutional-constitutional rules that constrain the...
- Equity (economics)Equity (economics)Equity is the concept or idea of fairness in economics, particularly as to taxation or welfare economics. More specifically it may refer to equal life chances regardless of identity, to provide all citizens with a basic minimum of income/goods/services or to increase funds and commitment for...
- Extended sympathyExtended sympathyExtended sympathy in welfare economics refers to interpersonal value judgments of the form that social state x for person A is ranked better than, worse than, or as good as social state y for person B...
- Fair divisionFair divisionFair division, also known as the cake-cutting problem, is the problem of dividing a resource in such a way that all recipients believe that they have received a fair amount...
- Laffer curveLaffer curveIn economics, the Laffer curve is a theoretical representation of the relationship between government revenue raised by taxation and all possible rates of taxation. It is used to illustrate the concept of taxable income elasticity . The curve is constructed by thought experiment...
- Philosophy and economics
- Normative economicsNormative economicsNormative economics is that part of economics that expresses value judgments about economic fairness or what the economy ought to be like or what goals of public policy ought to be....
- Positive economicsPositive economicsPositive economics is the branch of economics that concerns the description and explanation of economic phenomena. It focuses on facts and cause-and-effect behavioral relationships and includes the development and testing of economics theories...
- Social choice theorySocial choice theorySocial choice theory is a theoretical framework for measuring individual interests, values, or welfares as an aggregate towards collective decision. A non-theoretical example of a collective decision is passing a set of laws under a constitution. Social choice theory dates from Condorcet's...
- Social justiceSocial justiceSocial justice generally refers to the idea of creating a society or institution that is based on the principles of equality and solidarity, that understands and values human rights, and that recognizes the dignity of every human being. The term and modern concept of "social justice" was coined by...
- Social welfare functionSocial welfare functionIn economics, a social welfare function is a real-valued function that ranks conceivable social states from lowest to highest. Inputs of the function include any variables considered to affect the economic welfare of a society...
- Taxation as theftTaxation as theftThe identification of taxation as theft is viewpoint held by anarchists and some non-anarchist libertarians. It states that government is transgressing property rights by enforcing compulsory tax collection.-See also:*Anarchism*Libertarianism*Objectivism...