A Choice Modelling Approach
1.0 Introduction The question of a ‘fair’ allocation is one with which we all grapple in many contexts. For those in decision-making positions such as policy-makers, teachers and parents, it involves the difficult task of weighing up competing claims. These claims may be presented on the basis of allowing for special needs, compensating for handicaps, rewarding additional effort or striving for equality. Economists are well aware that, as a society, we are not able to meet the unlimited wants of each individual. The fundamental issue of scarcity necessitates decisions about allocation. The questions of how resources are used as efficiently as possible to maximize the well-being of people and how the distribution of resources is made ‘equitably’ are fundamental questions in economics. This book focuses on the latter question – that is, the equity or distributional aspect of economic analysis. The complexity of the notion of social justice confounds research into the equity principles and preferences held by the community. As will be discussed in Chapter 2, it is assumed that each individual has distributional preferences which can be interpreted in a social welfare ordering. Social welfare preferences may be based on a variety of justice principles. General ethical principles under lying discussions about fair allocation fall into several categories. The principles either formulate more specific interpretations of utilitarianism, where the wellbeing of each individual is summed, or apply alternative or complementary ethical frameworks (Banuri et al. 1996). For example, distributional preferences may be based on rewards according to contribution, equality...
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