Monday, October 11, 2010

What distribution principle would you choose behind a veil of ignorance?

A Theory of Justice: Revised Edition (Belknap)In his book, ‘A Theory of Justice’, John Rawls considered what principles of justice would be agreed upon by all behind a veil of ignorance in which no one knows their place in society - their wealth, their class position or social status, their intelligence, strength, state of health etc. One of the principles that Rawls argued would be agreed upon is the ‘difference principle’ – that social and economic inequalities should exist only insofar as they benefit the least well off members of society.

I think the veil of ignorance thought experiment is useful to consider public policy issues from a perspective that is broader than my own perceived interests. When I do this thought experiment, however, I don’t endorse the difference principle (sometimes referred to as the maximin principle). The principle I come up with is to maximize the opportunities of any person chosen at random, subject to provision of a safety net to protect the well-being of the least well off members of society. I expect that some critics would say, however, that I get this outcome because I am not doing the thought experiment properly.

A study undertaken by Hörisch Hannah a couple of years ago does not seem to have the same potential for personal bias to influence the results obtained. Hannah implemented the Rawlsian veil of ignorance in a laboratory experiment using variants of the dictator game (see: ‘Is the veil of ignorance only a concept about risk? An experiment’, Munich Discussion Paper No 2007-4). In the first experiment, one player, the dictator, decides how much of the pie will be received by the other player, given an efficiency loss of 50 percent for units that are transferred from the dictator to the receiver. The veil of ignorance is implemented by requiring each player to decide how much to give to the other player before being assigned the role of dictator or receiver (with equal probability). The second experiment is the same as the first except that the role of receiver is not actually assigned to a person so the outcome can be interpreted as a self-interested response to risk.

Only a minority of subjects opted for the maximin principle under either experiment. The vast majority of male participants perceived the veil of ignorance as introducing only risk. Among women participants, however, impartial social preferences were a second significant motivation that induces stronger concern for equality.

Although I think the results of the study are extremely interesting, they can hardly be presumed to reflect universal values. The study is quite small, with only 167 participants (all university students). There may be potential for bias because about two-thirds of respondents have studied some economics. It would be interesting to see results for similar studies, for people of different ages and backgrounds in different countries.

It would also be interesting to know whether there is any link between the values that people display when they play this game and their political views. Are the views of individual voters strongly influenced by principles that they support irrespective of their own perceived interests? If so, then perhaps politicians are whistling the wrong tune (or whistling to the wrong dog) when they are seen all the time to be responding to rent-seeking by narrow interest groups.

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