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Utilitarianism and Other Welfarist Approaches to Distributive Justice

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Utilitarianism and Other Welfarist Approaches to Distributive Justice Utilitarianism and other welfarist approaches to distributive justice Sverre Lillelien [email protected] October 8, 2009 1 Introduction Welfarism implies that the distribution of economic goods is evaluated solely by the e®ect it has on the welfare of each person in society. Welfare is taken to be an emotional state, subjectively experienced by each person. In this paper I will look at two welfarist approaches to distributive justice: Utilitarianism and economic welfare theory. Welfare, being a subjectively experienced emotional state, is somewhat intangible and cannot be easily quanti¯ed with numbers. We assume that welfare and income are positively correlated. Further, we assume individual welfare is measurable and comparable from one person to another. Given these assumptions, we analyze the distributions of income according to some of the di®erent welfarist schools of thought. Two of the more important schools of thought in welfare theory are util- itarianism and welfare economics. Utilitarianism introduces a philosophical system of ethics, while economic welfare theory analyzes allocation of re- sources and distributions of income taking the moral and legal framework as given. The terms welfare, utility and happiness are used interchangeably. 2 Utilitarianism From an analytical point of view, utilitarians see it as the goal of public pol- icy to maximize the total welfare of the population. This can be formalized as: Xn 1 Xn W = U (Y ) or W = U (Y ) i i n i i i=1 i=1 1 where Ui measures the utility of person i. Ui(Yi) shows the utility person i obtains from an income of Yi. The former formulation represents total welfare in the population, while the latter represents average welfare in a population of n individuals. Note the subscript i to each person's utility function, indicating indi- vidual preferences. This is in accordance with preference utilitarianism, a version of modern utilitarianism where the individual herself decides what makes her happy, often referred to as consumer sovereignty. This respect for individual preferences raises some interesting questions. Few would argue against the morality of some people preferring co®ee to tea, but what of more anti-social behavior? Should all deviant sexual preferences be equally respected? Should a person be allowed to inject heroin into his veins if he so should choose to? Prominent utilitarian John Harsanyi argues that anti-social preferences should not be included in the principle of consumer sovereignty. However, he does not go into great detail trying to de¯ne what comprises anti-social behavior, only noting persons displaying ill-will toward others and harboring antisocial feelings should have these parts of their pref- erences excluded when it comes to income distribution. Instead, he introduces the concept of moral preferences, the preferences of a benevolent and impartial observer of society. Using this veil of ignorance type logic, he concludes the observer would distribute welfare so as to max- 1 Pn imize average individual welfare Max W = n i=1 Ui. This is consistent with general theory for choice under certainty. 3 Income distribution We can show the implications of this maximization problem graphically, and see how a utilitarian distribution of income di®ers from a welfare egalitarian distribution. A welfare egalitarian would want to distribute welfare equally among the members of society, and this can lead to a very di®erent distri- bution than a utilitarian distribution. Following the notation in the book, we look at a society with two members: Kari and Ivar. Income distribution following from a welfare egalitarian distribution de- pends on the shape of the utility functions of the two individuals. In our example Ivar receives a larger share of total income than Kari, even though their utility level is the same. This is a result of Ivar needing a larger com- pensation in income to achieve the same utility level as Kari. The reason for di®erent preferences might simply be that Ivar has more expensive pref- erences; he prefers champagne to a walk in the park, or gourmet food to 2 Ivar's utility Kari's utility UKari UIvar YIvar YKari Figure 1: Welfare egalitarian distribution of income pizza, whereas the opposite might be true for Kari. It is also conceivable that the reason Ivar is a less e±cient utility machine than Kari is due to some sort of handicap. It is not hard to imagine a blind person requiring a larger share of income to achieve the same level of happiness as persons without the need for guide dogs or texts written in Braille. The utilitarian distribution is one of equal marginal utilities. Marginal utility (MU) is the gain in utility level from a unitary increase in income. The MU of income is decreasing, meaning that the higher ones income is, the less utility is derived from a further increase in income. The solution to the maximization problem subject to total income is to distribute income so that everyone's MU is the same. In our case: MUI = MUK . If MUK > MUI , then we could get an increase in total welfare by transferring income from Ivar to Kari. This transfer would decrease Ivar's welfare, but the gain to Kari's welfare would be greater in absolute value. In equality, no transfer would increase total welfare. This leads to a very di®erent distribution than the welfare egalitarian one. Where the egalitarian would assign a larger share of income to Ivar, we see that a utilitarian would do the opposite. Because Kari is more e±- cient, for whatever reason, at producing utility, the utilitarian would wish to distribute income so that Kari receives a larger share of total income. Even though the two conclusions are very di®erent, the same questions arise when it comes to justifying the fairness of distribution. Only when utility functions are identical do we have equality of welfare and income, while still 3 Ivar's MU Kari's MU MU Kari MUIvar YIvar YKari Figure 2: Utilitarian distribution of income maximizing welfare. Given di®erent utility functions, is it fair that the wel- fare egalitarian assigns a larger income to the more needy Ivar? And that the utilitarian would assign most income to Kari because she is more e±cient at being happy? Most people would probably ¯nd it more fair that Ivar be assigned a larger share of total income if this was because of a handicap, rather than a result of lavish tastes and luxurious habits. However, neither the utilitarian nor the welfare egalitarian care about the reasons behind these di®erences in preferences when it comes to distributional policy. 4 Social welfare functions A social welfare function (SWF) is a real-valued function that ranks con- ceivable levels of welfare in a society from lowest to highest. It's analogous to indi®erence curves for individual welfare, but looks at the welfare of all persons in the economy. The values of social welfare functions are denoted by W , social welfare, while individual welfare is denoted by U We will now study the social indi®erence curves of the utilitarian social welfare function, as well as those of the Sen function. 4.1 The utilitarian social welfare function 1 Pn The utilitarian rule W = n i=1 Ui gives us a utilitarian social welfare function. When we map this function into a diagram, still using a two- 4 Ivar's welfare Ivar's welfare U W2 W1 A W2 W1 U' Kari's welfare Kari's welfare Figure 3: Utilitarian (left) and Sen (right) welfare functions person economy, we'll see that the utilitarian social indi®erence curves are straight lines. The straight lines in ¯gure 3 illustrate inequality neutrality. The function is also symmetrical, meaning a given distribution of welfare to Ivar is weighted equal in terms of social welfare, as if the same amount of welfare had been distributed to Kari. In this sense, all persons are treated as equals. But according to a utilitarian SWF, given a speci¯c level of welfare in the economy, it doesn't matter for the state of society whether Ivar receives 90 percent of total welfare, and Kari ten percent, or if welfare is equally distributed amongst them. This inequality neutrality raises some ethical problems. Many people would ¯nd this unjust, and Rawls has stated that utilitarianism breaks the Kantian tenet that no man should be treated as means to the ends of another. 4.2 The Sen function The Sen function is, like the utilitarian SWF, symmetrical and satis¯es the Pareto principle. However, unlike the utilitarian SWF, it is inequality averse. The Sen function takes the general form W = W (U1;U2; :::; Un). In the utilitarian SWF, we could only get an improvement in the state of society by increasing the sum of individual welfares. This would also improve the state of society using a Sen function, but we also get an improvement by distributing individual welfare more equally. In ¯gure 3 W2 > W1, and the line U ¡U 0 represents points where the sum of individual welfare is constant. In point A we have equality of welfare. 5 5 Critique of welfarism As we have seen, preference utilitarianism can raise problems when it comes to what a society sees as acceptable behavior. Further problems arise as to what is just and ethically acceptable when we consider that the moral guidelines and opinions of societies change over time. We have also seen that a utilitarian would distribute income such that whoever is most e±cient at producing utility would receive the greater share. The reason a person is more e±cient or less e±cient is irrelevant, whether it is because of a handicap or just expensive tastes.
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