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The Economics of Fairness
A growing literature in economics has studied how fairness considerations shape human behavior. This research collection comprises forty key theoretical and empirical contributions spanning the last four decades, along with influential related work in normative economics. These papers show that the fairness motive is essential for understanding human behavior in a wide range of settings, such as markets, bargaining, and redistributive situations. They document large heterogeneity in what people view as fair and the importance people attach to fairness, displaying how a concern for fairness develops in childhood and manifests itself in the brain. Together with an original introduction by the editors, this volume will be a valuable research tool for those interested in the fascinating field of the economics of fairness.
More Information
Critical Acclaim
Contributors
Contents
More Information
A growing literature in economics has studied how fairness considerations shape human behavior. This research collection comprises forty key theoretical and empirical contributions spanning the last four decades, along with influential related work in normative economics. These papers show that the fairness motive is essential for understanding human behavior in a wide range of settings, such as markets, bargaining, and redistributive situations. They document large heterogeneity in what people view as fair and the importance people attach to fairness, displaying how a concern for fairness develops in childhood and manifests itself in the brain. Together with an original introduction by the editors, this volume will be a valuable research tool for those interested in the fascinating field of the economics of fairness.
Critical Acclaim
‘This is a long-overdue book on fairness – one of the most exciting topics in behavioral economics. Alexander Cappelen and Bertil Tungodden did a great job collecting the important milestones in this literature. From early normative accounts to recent empirical advances, this book organizes and presents all you need to know in order to understand how economists think about the topic.’
– Uri Gneezy, University of California, San Diego, US
– Uri Gneezy, University of California, San Diego, US
Contributors
40 articles, dating from 1975 to 2014
Contributors include: G. Akerlof, A. Alesina, C. Camerer, A. Falk, E. Fehr, M. Fleurbaey, D. Kahneman, M. Rabin, A. Sen, J. Tirole
Contributors include: G. Akerlof, A. Alesina, C. Camerer, A. Falk, E. Fehr, M. Fleurbaey, D. Kahneman, M. Rabin, A. Sen, J. Tirole
Contents
Contents:
Introduction Alexander W. Cappelen and Bertil Tungodden
PART I NORMATIVE ANALYSIS OF FAIRNESS
1. John E. Roemer (1986), ‘Equality of Resources Implies Equality of Welfare’, Quarterly Journal of Economics, 101 (4), November, 751–84
2. Marc Fleurbaey (1995), ’Three Solutions for the Compensation Problem’, Journal of Economic Theory, 65 (2), April, 505–21
3. Julian Le Grand (1990), ‘Equity versus Efficiency: The Elusive Trade-off’, Ethics, 100 (3), April, 554–68
4. James Konow (2003), ‘Which Is the Fairest One of All? A Positive Analysis of Justice Theories’, Journal of Economic Literature, XLI (4), December, 1188–239
5. Hal R. Varian (1975), ‘Distributive Justice, Welfare Economics, and the Theory of Fairness’, Philosophy and Public Affairs, 4 (3), Spring, 223–47
6. Amartya Sen (1979), ‘Equality of What?’, The Tanner Lecture on Human Values, Delivered at Stanford University, May 22nd, 1979, Salt Lake City, UT, USA: University of Utah Press, i–ii, 197–220
PART II FAIRNESS AND HUMAN BEHAVIOR
7. Matthew Rabin (1993), ‘Incorporating Fairness into Game Theory and Economics’, American Economic Review, 83 (5), December, 1281–302
8. Elizabeth Hoffman, Kevin McCabe and Vernon L. Smith (1996), ‘Social Distance and Other-Regarding Behavior in Dictator Games’, American Economic Review, 86 (3), June, 653–60
9. Ernst Fehr and Klaus M. Schmidt (1999), ‘A Theory of Fairness, Competition, and Cooperation’, Quarterly Journal of Economics, 114 (3), August, 817–68
10. James Konow (2000), ‘Fair Shares: Accountability and Cognitive Dissonance in Allocation Decisions’, American Economic Review, 90 (4), September, 1072–91
11. Armin Falk, Ernst Fehr and Urs Fischbacher (2008), ‘Testing Theories of Fairness – Intentions Matter’, Games and Economic Behavior, 62 (1), January, 287–303
12. Alexander W. Cappelen, Astri Drange Hole, Erik Ø. Sørensen and Bertil Tungodden (2007), ‘The Pluralism of Fairness Ideals: An Experimental Approach’, American Economic Review, 97 (3), June, 818–27
13. Gary E. Bolton and Axel Ockenfels (2000), ‘ERC: A Theory of Equity, Reciprocity, and Competition’, American Economic Review, 90 (1), March, 166–93
14. Gary Charness and Matthew Rabin (2002), ‘Understanding Social Preferences with Simple Tests’, Quarterly Journal of Economics, 117 (3), August, 817–69
15. Elizabeth Hoffman, Kevin McCabe, Keith Shachat and Vernon Smith (1994), ‘Preferences, Property Rights, and Anonymity in Bargaining Games’, Games and Economic Behavior, 7 (3), November, 346–80
16. Dirk Engelmann and Martin Strobel (2004), ‘Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments’, American Economic Review, 94 (4), September, 857–69
17. James Andreoni and Lise Vesterlund (2001), ‘Which is the Fair Sex? Gender Differences in Altruism’, Quarterly Journal of Economics, 116 (1), February, 293–312
18. Raymond Fisman, Shachar Kariv and Daniel Markovits (2007), ‘Individual Preferences for Giving’, American Economic Review, 97 (5), December, 1858–76
19. Ernst Fehr and Simon Gächter (2000), ‘Fairness and Retaliation: The Economics of Reciprocity’, Journal of Economic Perspectives, 14 (3), Summer, 159–81
PART III THE DEVELOPMENT OF FAIRNESS PREFERENCES
20. Ernst Fehr, Helen Bernhard and Bettina Rockenbach (2008), ‘Egalitarianism in Young Children’, Nature, 454, 28th August, 1079–83
21. Joseph Henrich, Jean Ensminger, Richard McElreath, Abigail Barr, Clark Barrett, Alexander Bolyanatz, Juan Camilo Cardenas, Michael Gurven, Edwins Gwako, Natalie Henrich, Carolyn Lesorogol, Frank Marlowe, David Tracer and John Ziker (2010), ‘Markets, Religion, Community Size, and the Evolution of Fairness and Punishment’, Science, 327 (5972), 19th March, 1480–84, Erratum
22. Ingvild Almås, Alexander W. Cappelen, Erik Ø. Sørensen and Bertil Tungodden (2010), ‘Fairness and the Development of Inequality Acceptance’, Science, 328 (5982), 28th May, 1176–78
23. Ernst Fehr, Daniela Glätzle-Rützler and Matthias Sutter (2013), ‘The Development of Egalitarianism, Altruism, Spite and Parochialism in Childhood and Adolescence’, European Economic Review, 64, November, 369–83
24. Martin A. Nowak, Karen M. Page and Karl Sigmund (2000), ‘Fairness Versus Reason in the Ultimatum Game’, Science, 289 (5485), 8th September, 1773–75
PART IV NEURAL EVIDENCE OF FAIRNESS
25. Alexander W. Cappelen, Tom Eichele, Kenneth Hugdahl, Karsten Specht, Erik Ø. Sørensen and Bertil Tungodden (2014), ‘Equity Theory and Fair Inequality: A Neuroeconomic Study’, Proceedings of the National Academy of Sciences (PNAS), 111 (43), 28th October, 15368–72
26. Elizabeth Tricomi, Antonio Rangel, Colin F. Camerer and John P. O’Doherty (2010), ‘Neural Evidence for Inequality-Averse Social Preferences’, Nature, 463, 25th February, 1089–91, methods
27. Ming Hsu, Cédric Anen and Steven R. Quartz (2008), ‘The Right and the Good: Distributive Justice and Neural Encoding of Equity and Efficiency’, Science, 320 (5879), 23rd May, 1092–95
28. Ernst Fehr and Colin F. Camerer (2007), ‘Social Neuroeconomics: The Neural Circuitry of Social Preferences’, TRENDS in Cognitive Sciences, 11 (10), October, 419–27
29. Alan G. Sanfey, James K. Rilling, Jessica A. Aronson, Leigh E. Nystrom and Jonathan D. Cohen (2003), ‘The Neural Basis of Economic Decision-Making in the Ultimatum Game’, Science, 300 (5626), 13th June, 1755–58
PART V FAIRNESS AND BARGAINING
30. Linda Babcock and George Loewenstein (1997), ‘Explaining Bargaining Impasse: The Role of Self-Serving Biases’, Journal of Economic Perspectives, 11 (1), Winter, 109–26
31. Robert Forsythe, Joel L. Horowitz, N. E. Savin and Martin Sefton (1994), ‘Fairness in Simple Bargaining Experiments’, Games and Economic Behavior, 6 (3), May, 347–69
32. Werner Güth, Rolf Schmittberger and Bernd Schwarze (1982), ‘An Experimental Analysis of Ultimatum Bargaining’, Journal of Economic Behavior and Organization, 3 (4), December, 367–88
PART VI FAIRNESS AND REDISTRIBUTION
33. Alberto Alesina and George-Marios Angeletos (2005), ‘Fairness and Redistribution’, American Economic Review, 95 (4), September, 960–80
34. Roland Bénabou and Jean Tirole (2006), ‘Belief in a Just World and Redistributive Politics’, Quarterly Journal of Economics, 121 (2), May, 699–746
35. Christina Fong (2001), ‘Social Preferences, Self-Interest, and the Demand for Redistribution’, Journal of Public Economics, 82 (2), November, 225–46
36. Marc Fleurbaey and François Maniquet (2006), ‘Fair Income Tax’, Review of Economic Studies, 73 (1), January, 55–83
37. Ruben Durante, Louis Putterman and Joël van der Weele (2014), ‘Preferences for Redistribution and Perception of Fairness: An Experimental Study’, Journal of the European Economic Association, 12 (4), August, 1059–86
PART VII FAIRNESS AND MARKETS
38. Daniel Kahneman, Jack L. Knetsch and Richard Thaler (1986), ‘Fairness as a Constraint on Profit Seeking: Entitlements in the Market’, American Economic Review, 76 (4), September, 728–41
39. Ernst Fehr, Georg Kirchsteiger and Arno Riedl (1993), ‘Does Fairness Prevent Market Clearing? An Experimental Investigation’, Quarterly Journal of Economics, 108 (2), May, 437–59
40. George A. Akerlof and Janet L. Yellen (1990), ‘The Fair Wage-Effort Hypothesis and Unemployment’, Quarterly Journal of Economics, CV (2), May, 255–83
Index
Introduction Alexander W. Cappelen and Bertil Tungodden
PART I NORMATIVE ANALYSIS OF FAIRNESS
1. John E. Roemer (1986), ‘Equality of Resources Implies Equality of Welfare’, Quarterly Journal of Economics, 101 (4), November, 751–84
2. Marc Fleurbaey (1995), ’Three Solutions for the Compensation Problem’, Journal of Economic Theory, 65 (2), April, 505–21
3. Julian Le Grand (1990), ‘Equity versus Efficiency: The Elusive Trade-off’, Ethics, 100 (3), April, 554–68
4. James Konow (2003), ‘Which Is the Fairest One of All? A Positive Analysis of Justice Theories’, Journal of Economic Literature, XLI (4), December, 1188–239
5. Hal R. Varian (1975), ‘Distributive Justice, Welfare Economics, and the Theory of Fairness’, Philosophy and Public Affairs, 4 (3), Spring, 223–47
6. Amartya Sen (1979), ‘Equality of What?’, The Tanner Lecture on Human Values, Delivered at Stanford University, May 22nd, 1979, Salt Lake City, UT, USA: University of Utah Press, i–ii, 197–220
PART II FAIRNESS AND HUMAN BEHAVIOR
7. Matthew Rabin (1993), ‘Incorporating Fairness into Game Theory and Economics’, American Economic Review, 83 (5), December, 1281–302
8. Elizabeth Hoffman, Kevin McCabe and Vernon L. Smith (1996), ‘Social Distance and Other-Regarding Behavior in Dictator Games’, American Economic Review, 86 (3), June, 653–60
9. Ernst Fehr and Klaus M. Schmidt (1999), ‘A Theory of Fairness, Competition, and Cooperation’, Quarterly Journal of Economics, 114 (3), August, 817–68
10. James Konow (2000), ‘Fair Shares: Accountability and Cognitive Dissonance in Allocation Decisions’, American Economic Review, 90 (4), September, 1072–91
11. Armin Falk, Ernst Fehr and Urs Fischbacher (2008), ‘Testing Theories of Fairness – Intentions Matter’, Games and Economic Behavior, 62 (1), January, 287–303
12. Alexander W. Cappelen, Astri Drange Hole, Erik Ø. Sørensen and Bertil Tungodden (2007), ‘The Pluralism of Fairness Ideals: An Experimental Approach’, American Economic Review, 97 (3), June, 818–27
13. Gary E. Bolton and Axel Ockenfels (2000), ‘ERC: A Theory of Equity, Reciprocity, and Competition’, American Economic Review, 90 (1), March, 166–93
14. Gary Charness and Matthew Rabin (2002), ‘Understanding Social Preferences with Simple Tests’, Quarterly Journal of Economics, 117 (3), August, 817–69
15. Elizabeth Hoffman, Kevin McCabe, Keith Shachat and Vernon Smith (1994), ‘Preferences, Property Rights, and Anonymity in Bargaining Games’, Games and Economic Behavior, 7 (3), November, 346–80
16. Dirk Engelmann and Martin Strobel (2004), ‘Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments’, American Economic Review, 94 (4), September, 857–69
17. James Andreoni and Lise Vesterlund (2001), ‘Which is the Fair Sex? Gender Differences in Altruism’, Quarterly Journal of Economics, 116 (1), February, 293–312
18. Raymond Fisman, Shachar Kariv and Daniel Markovits (2007), ‘Individual Preferences for Giving’, American Economic Review, 97 (5), December, 1858–76
19. Ernst Fehr and Simon Gächter (2000), ‘Fairness and Retaliation: The Economics of Reciprocity’, Journal of Economic Perspectives, 14 (3), Summer, 159–81
PART III THE DEVELOPMENT OF FAIRNESS PREFERENCES
20. Ernst Fehr, Helen Bernhard and Bettina Rockenbach (2008), ‘Egalitarianism in Young Children’, Nature, 454, 28th August, 1079–83
21. Joseph Henrich, Jean Ensminger, Richard McElreath, Abigail Barr, Clark Barrett, Alexander Bolyanatz, Juan Camilo Cardenas, Michael Gurven, Edwins Gwako, Natalie Henrich, Carolyn Lesorogol, Frank Marlowe, David Tracer and John Ziker (2010), ‘Markets, Religion, Community Size, and the Evolution of Fairness and Punishment’, Science, 327 (5972), 19th March, 1480–84, Erratum
22. Ingvild Almås, Alexander W. Cappelen, Erik Ø. Sørensen and Bertil Tungodden (2010), ‘Fairness and the Development of Inequality Acceptance’, Science, 328 (5982), 28th May, 1176–78
23. Ernst Fehr, Daniela Glätzle-Rützler and Matthias Sutter (2013), ‘The Development of Egalitarianism, Altruism, Spite and Parochialism in Childhood and Adolescence’, European Economic Review, 64, November, 369–83
24. Martin A. Nowak, Karen M. Page and Karl Sigmund (2000), ‘Fairness Versus Reason in the Ultimatum Game’, Science, 289 (5485), 8th September, 1773–75
PART IV NEURAL EVIDENCE OF FAIRNESS
25. Alexander W. Cappelen, Tom Eichele, Kenneth Hugdahl, Karsten Specht, Erik Ø. Sørensen and Bertil Tungodden (2014), ‘Equity Theory and Fair Inequality: A Neuroeconomic Study’, Proceedings of the National Academy of Sciences (PNAS), 111 (43), 28th October, 15368–72
26. Elizabeth Tricomi, Antonio Rangel, Colin F. Camerer and John P. O’Doherty (2010), ‘Neural Evidence for Inequality-Averse Social Preferences’, Nature, 463, 25th February, 1089–91, methods
27. Ming Hsu, Cédric Anen and Steven R. Quartz (2008), ‘The Right and the Good: Distributive Justice and Neural Encoding of Equity and Efficiency’, Science, 320 (5879), 23rd May, 1092–95
28. Ernst Fehr and Colin F. Camerer (2007), ‘Social Neuroeconomics: The Neural Circuitry of Social Preferences’, TRENDS in Cognitive Sciences, 11 (10), October, 419–27
29. Alan G. Sanfey, James K. Rilling, Jessica A. Aronson, Leigh E. Nystrom and Jonathan D. Cohen (2003), ‘The Neural Basis of Economic Decision-Making in the Ultimatum Game’, Science, 300 (5626), 13th June, 1755–58
PART V FAIRNESS AND BARGAINING
30. Linda Babcock and George Loewenstein (1997), ‘Explaining Bargaining Impasse: The Role of Self-Serving Biases’, Journal of Economic Perspectives, 11 (1), Winter, 109–26
31. Robert Forsythe, Joel L. Horowitz, N. E. Savin and Martin Sefton (1994), ‘Fairness in Simple Bargaining Experiments’, Games and Economic Behavior, 6 (3), May, 347–69
32. Werner Güth, Rolf Schmittberger and Bernd Schwarze (1982), ‘An Experimental Analysis of Ultimatum Bargaining’, Journal of Economic Behavior and Organization, 3 (4), December, 367–88
PART VI FAIRNESS AND REDISTRIBUTION
33. Alberto Alesina and George-Marios Angeletos (2005), ‘Fairness and Redistribution’, American Economic Review, 95 (4), September, 960–80
34. Roland Bénabou and Jean Tirole (2006), ‘Belief in a Just World and Redistributive Politics’, Quarterly Journal of Economics, 121 (2), May, 699–746
35. Christina Fong (2001), ‘Social Preferences, Self-Interest, and the Demand for Redistribution’, Journal of Public Economics, 82 (2), November, 225–46
36. Marc Fleurbaey and François Maniquet (2006), ‘Fair Income Tax’, Review of Economic Studies, 73 (1), January, 55–83
37. Ruben Durante, Louis Putterman and Joël van der Weele (2014), ‘Preferences for Redistribution and Perception of Fairness: An Experimental Study’, Journal of the European Economic Association, 12 (4), August, 1059–86
PART VII FAIRNESS AND MARKETS
38. Daniel Kahneman, Jack L. Knetsch and Richard Thaler (1986), ‘Fairness as a Constraint on Profit Seeking: Entitlements in the Market’, American Economic Review, 76 (4), September, 728–41
39. Ernst Fehr, Georg Kirchsteiger and Arno Riedl (1993), ‘Does Fairness Prevent Market Clearing? An Experimental Investigation’, Quarterly Journal of Economics, 108 (2), May, 437–59
40. George A. Akerlof and Janet L. Yellen (1990), ‘The Fair Wage-Effort Hypothesis and Unemployment’, Quarterly Journal of Economics, CV (2), May, 255–83
Index
