VIEWS: 8 PAGES: 6 CATEGORY: Social Sciences POSTED ON: 6/18/2010
According to the Pareto principle in economics, we can consider welfare to improve only if some are made better off, while no-one is made worse off. [...] if economic growth is accompanied with widening inequality, it's still beneficial, just so long as no one goes backward.
Fairness Matters Ian McAuley | University of Canberra and Fellow, Centre for Policy Development Extract from the presentation given to Bentham (1768 – 1832) was a liberal political ACOSS National Conference, April 2009 philosopher, a child of the Enlightenment, with radical ideas for his time, such as Introduction – fairness matters equal rights for women, abolition of slavery, and abolition of the death penalty. His I want to concentrate on economic aspects political philosophy has been claimed both of fairness, emphasizing one aspect by the right, because of its emphasis on particularily relevant to our time, namely individualism, and by the left, because of its the way we allocate risk across our society. emphasis on maximizing “utility” for all, or, in more commonplace terms, maximizing In relation to risk there are two basic the community’s “welfare” or “happiness”. inequities. One arises from the legacy of outdated categories of “labor” and In the Benthamite world, redistribution is Such a notion of welfare lies behind “capital”, to which is attached the idea that justified on the basis of the notion of what economic policies such as progressive because financiers contribute capital to economists call “diminishing marginal taxation and means-tested benefits. productive enterprises, because they take utility”. Australia, for example, pioneered age the risks, they should be compensated with pensions and used to have steeply rising appropriate rewards. The other inequity To illustrate, consider two hypothetical marginal tax rates, as high as 66 cents in arises from the way we have increasingly left people. I’ll call one Sol, who has been an the dollar for high income earners, and our people, including the least advantaged, to executive in a large company and has old sales tax system imposed high taxes rely on flawed and high risk private markets had a generous termination payment. on luxuries. to provide those buffers which would be And there’s Lydia, who is similarly out of more fairly and efficiently be provided by work, but she was a machine operator at The economic philosopher whose ideas governments, while privileging some of a clothing company which has recently have tended to dominate in the last thirty the most reckless and irresponsible people shifted offshore. Both are eligible for the years, however, is Pareto (1848 – 1923), in private corporations with government Government’s $900 stimulus payment. who essentially said that it is impossible largesse for their risk-taking. Sol has a good accountant who has got to compare and add or subtract different his taxable income down to poverty line people’s welfare. According to the Pareto First, a look at how economics handles levels, while Lydia needs no accounting principle in economics, we can consider fairness. contrivances to show a low income. welfare to improve only if some are made better off, while no-one is made worse off. Pareto’s boats and public policy Think of the benefit of the $900 to these two Thus, if economic growth is accompanied people. By any stretch of the imagination with widening inequality, it’s still beneficial, “A rising tide lifts all boats” is the often the benefit to Lydia must surely be more just so long as no one goes backward. If heard metaphor to describe a society than the benefit to Sol (assuming Sol even Sol gets $900 while Lydia gets $9 or even in which everyone becomes better off, notices an unrequited $900 deposit in his nothing, that’s a Pareto improvement, but even if disparities widen. It has become a bank accou
Pages to are hidden for
"Fairness Matters"Please download to view full document