Archive for the 'Fairness' Category

What’s Fair is Fair

Suppose you’ve got 1000 students to assign to two schools, each with 500 slots available. Everyone prefers the Good School to the Bad School. Which of the following is a fair way to decide who goes where?

Method A: Give each student a coin to flip and count on the Law of Large Numbers to insure that just about exactly 500 will flip heads. Those students go to the Good School.

Method B: Randomly assign each student to one of two groups. Then flip a single coin to determine which group goes to the Good School.

Method C: After taking note of the fact that, coincidentally, exactly half the students are white and half are black, flip a single coin to determine which race goes to the Good School.

Method D: Assign all the white students to the Good School.

(There’s also of course Method D-prime, where you assign all the black students to the Good School, but I don’t think we need to consider this one separately.)

I ask this question because economists have been very involved with the design of school-allocation mechanisms, particularly in Boston, and one of the things they worry about is fairness. So it seems important to stop and think about what fairness means in this context.

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Thoughts on the Minimum Wage

The usual case against the minimum wage has three components:

  1. Minimum wages reduce employment among unskilled workers.
  2. Therefore minimum wages are bad for unskilled workers.
  3. Therefore minimum wages are bad policy.

The problems with this case are that

  1. Minimum wages might not reduce employment very much.
  2. Even if they do, that doesn’t make them bad for unskilled workers.
  3. Therefore we cannot conclude (via this route) that minimum wages are bad policy.

Minimum wages are bad policy, though — but for entirely different reasons.

I’ll get to those reasons shortly, but first let’s examine the traditional argument a little more closely. I’ll number my paragraphs to make it easier for commenters to respond.

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Some Questions for Uwe Reinhardt

First Greg Mankiw wrote a good piece in the New York Times about how there’s sometimes a hazy line between ordinary income and legitimate capital gains. Then Uwe Reinhardt wrote a puzzling (at least to me) followup in which he concluded that we might as well just give up and tax both at the same rate. I have some questions for Professor Reinhardt.

Question 1:

  1. Sometimes there is a hazy line between quotation and plagiarism. Does it follow that we should treat every quotation as an instance of plagiarism?
  2. Sometimes there is a hazy line between a pat on the back and an assault with intent to harm. Does it follow that we should treat every pat on the back as an intent to harm?
  3. Sometimes there is a hazy line between adolescence and maturity. Does it follow that we should treat everyone as an adolescent?
  4. If the answer to any of the above is no, what’s different about capital gains?

Professor Reinhardt goes on to instance the case of a person who buys a vacation home for $500,000 and sells it two years later for $1.5 million, suggesting that it would be unfair to let this person hang on to all of this gain, so it should therefore be taxed at the same rate as ordinary income. This brings me to the next questions:

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Rush to Judgment

rushRush Limbaugh is under fire for responding in trademark fashion to the congressional testimony of Georgetown law student Sandra Fluke, who wants you to pay for her contraception. If the rest of us are to share in the costs of Ms. Fluke’s sex life, says Rush, we should also share in the benefits, via the magic of online video. For this, Rush is accused of denying Ms. Fluke her due respect.

But while Ms. Fluke herself deserves the same basic respect we owe to any human being, her position — which is what’s at issue here — deserves none whatseover. It deserves only to be ridiculed, mocked and jeered. To treat it with respect would be a travesty. I expect there are respectable arguments for subsidizing contraception (though I am skeptical that there are arguments sufficiently respectable to win me over), but Ms. Fluke made no such argument. All she said, in effect, was that she and others want contraception and they don’t want to pay for it.

To his credit, Rush stepped in to provide the requisite mockery. To his far greater credit, he did so with a spot-on analogy: If I can reasonably be required to pay for someone else’s sex life (absent any argument about externalities or other market failures), then I can reasonably demand to share in the benefits. His dense and humorless critics notwithstanding, I am 99% sure that Rush doesn’t actually advocate mandatory on-line sex videos. What he advocates is logical consistency and an appreciation for ethical symmetry. So do I. Color me jealous for not having thought of this analogy myself.

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Tipping Points

tippingMario Rizzo has a post on why he gives small tips to cab drivers and Brad DeLong concludes that Rizzo is a liar, a cheat and a psychopath-in-the-making.

You’d never know it from DeLong’s selective summary, but Rizzo’s post is dense with interesting (if elementary) economics. A key point is that when you think you’re tipping a New York cab driver, you’re really tipping the medallion owner. (A medallion is a license to drive a cab; medallions are in fixed supply and currently trade for a price of about three quarters of a million dollars. Your driver is probably leasing his medallion from its owner.) If we all started tipping, say, an extra $2 per ride, then medallion owners would demand another $2 per ride in rental fares—effectively claiming all the additional tips for themselves. (Click here for a slightly longer explanation.)

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Blind Justice

Partially blind gamer Alexander Stern wants Sony to make its games more accessible to him and others like him—and he’s gone to court to force the issue. This raises the question: Exactly what does Sony owe to Alexander Stern (and others like him)?

A similar issue comes up in Chapter 20 of The Big Questions, where Mary the landlord won’t rent to, say, Albanians. Ought we force her to?

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