The nexus between economic inequality and social welfare

June 16, 2020

Equity (or, its counterpart, inequity) plays a fundamental role in the evaluation of the different dimensions of social welfare. But how can we consider and compare its different dimensions? These issues are in fact traditionally considered and compared across individuals - be it within national boundaries or across countries, but also over time, when we consider the distribution of resources over time and the related questions of savings, intergenerational distribution stemming from capital dynamics or the intertemporal use of natural resources. Finally, there's a third dimension ("states of the world" or future worlds) that takes into account the presence of uncertainty affecting the realizations of random variables. While the economics research has historically considered the fundamentally different dimensions of individuals, time, and states of the world separately, it is now clear that different potential dimensions of "inequity" (i.e., unequal distribution of resources in a particular dimension) are potentially closely intertwined: inequality between contemporaneous individuals might be correlated with intergenerational inequity between generations, uncertainty might affect individuals differently, and so on. Focusing on one dimension of inequity in isolation therefore runs the risk of neglecting potentially important interaction effects.

Journal of Economic Surveys revisits the concept of inequity - in the sense of unequal distributions - across individuals, time, and states of the world using a unified framework that generalizes the standard approach typically used to aggregate the different dimensions of social welfare. The study, co-authored by
This generalized framework enables researchers to gather different concepts that have been investigated separately in previous researches.

"Unequal distribution of consumption or income", explains Johannes Emmerling, "comes in different 'dimensions': spatial, or across individuals within a country or in different countries; temporal between different generations, or in different 'states of the world' or uncertain worlds in which we could possibly live in the future. The aggregation of and comparison between individuals in these dimensions is crucial for studying issues with global, uncertain, and long-term consequences, such as climate change. Our study shows how inequity in these dimensions can be treated in a similar and analytical equivalent way. Moreover, we allowed for different preferences towards inequality in different dimensions, and found out that the order of aggregation across them matters for the evaluation of economic and environmental policies."

The study highlights that people tend to evaluate inequality differently in different dimensions: people tend to be very much concerned about the future (so we have a strong preference for giving something to the future generations), while are less concerned about current inequality (e.g., people living in different countries with different income levels). Moreover, people tend to have a higher degree of inequity aversion in terms of uncertainty compared to inequality and intertemporal distribution.

Climate change is a classic example that combines the three dimensions of individuals, time, and states together: issues that have been raised in this context include intergenerational inequity (e.g., the social discount rate), the notion of inequality and distributional justice, and the role of (deep) uncertainty together with the related idea of a precautionary principle. The common feature across these seemingly unrelated concepts is that losses and benefits of given policies need to be compared along different dimensions. "It's not obvious" adds J. Emmerling, "how taking into account inequality in climate change evaluation, but our research underlines the importance of inequality in the evaluation of long-term climate policies."
-end-
Read more:

The paper on Journal of Economic Surveys: Loic Berger and Johannes Emmerling (2020) Welfare as equity equivalents, Journal of Economic Surveys,
https://doi.org/10.1111/joes.12368

CMCC Foundation - Euro-Mediterranean Center on Climate Change

Related Dimension Articles from Brightsurf:

Converting lateral scanning into axial focusing to speed up 3D microscopy
In optical microscopy, high-speed volumetric imaging is limited by either the slow axial scanning rate or aberrations introduced by the z-scanning mechanism.

Shining a light on disordered and fractal systems
A research team led by the University of Tsukuba investigated the acoustic properties of disordered lysozyme proteins by using terahertz spectroscopy.

Adding another dimension to a cell culture model for pulmonary arterial hypertension
Pulmonary arterial hypertension is a rare disease in which excessive proliferation of the cells of pulmonary arterial walls obstructs the blood flow in the lungs.

Boson particles discovery provides insights for quantum computing
Researchers working on a U.S. Army project discovered a key insight for the development of quantum devices and quantum computers.

Quantum copycat: Researchers find a new way in which bosons behave like fermions
When a one-dimensional gas of strongly interacting bosons expands, the velocity distribution of the bosons transforms into one that is identical to non-interacting fermions.

Deep-sea osmolyte makes biomolecular machines heat-tolerant
Researchers have discovered a method to control biomolecular machines over a wide temperature range using deep-sea osmolyte trimethylamine N-oxide (TMAO).

Faith, truth and forgiveness: How your brain processes abstract thoughts
Researchers at Carnegie Mellon University have leveraged machine learning to interpret human brain scans, allowing the team to uncover the regions of the brain behind how abstract concepts, like justice, ethics and consciousness, form.

Our universe: An expanding bubble in an extra dimension
Uppsala University researchers have devised a new model for the universe -- one that may solve the enigma of dark energy.

Are you stressed? Your eyes may provide a window into your mental workload
With nearly breakneck speed, the demands of work productivity in today's society seem to have increased tenfold.

New device widens light beams by 400 times
NIST scientists have now developed a highly efficient device that enlarges the diameter of a light beam by 400 times.

Read More: Dimension News and Dimension Current Events
Brightsurf.com is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.