A Bitter Choice Turned Sweet: How Acknowledging Individuals’ Concern at Having a Low Relative Income Serves to Align Utilitarianism and Egalitarianism

24 Pages Posted: 10 Mar 2015

See all articles by Oded Stark

Oded Stark

University of Bonn; University of Warsaw; University of Tuebingen

Marcin Jakubek

Polish Academy of Sciences (PAS) - Institute of Economics (INE PAN)

Martyna Kobus

Polish Academy of Sciences (PAS)

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Date Written: March 2015

Abstract

When individuals’ utility is a convex combination of their income and their concern at having a low relative income (the weights attached to income and to the concern at having a low relative income sum up to one), the maximization of aggregate utility yields an equal income distribution. This alignment of utilitarianism and egalitarianism is obtained for any number of individuals, and for general utility functions that are convex combinations of a power function of income and the concern at having a low relative income. The alignment can also hold when the weights sum up to a number different than one.

Keywords: Utilitarianism; Egalitarianism; Social welfare maximization; Low relative income

JEL Classification: H00; I00; I30; I31

Suggested Citation

Stark, Oded and Jakubek, Marcin and Kobus, Martyna, A Bitter Choice Turned Sweet: How Acknowledging Individuals’ Concern at Having a Low Relative Income Serves to Align Utilitarianism and Egalitarianism (March 2015). Available at SSRN: https://ssrn.com/abstract=2576085 or http://dx.doi.org/10.2139/ssrn.2576085

Oded Stark (Contact Author)

University of Bonn

Walter-Flex-Str. 3
Bonn, NRW 53113
Germany

University of Warsaw

Dluga Street 44/50
Warsaw, 00-241
Poland

University of Tuebingen

Wilhelmstr. 19
Tuebingen, Baden Wuerttemberg 72074
Germany

Marcin Jakubek

Polish Academy of Sciences (PAS) - Institute of Economics (INE PAN) ( email )

Palace of Culture and Science
Pl. Defilad 1
Warsaw, 00-901
Poland

Martyna Kobus

Polish Academy of Sciences (PAS) ( email )

3 Maja str. 2 m 164
Warsaw, 00-391
Poland

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