The Reality and Masquerade behind Bargaining over Welfare Pie Sizing, Delivery and Slicing.

Mullat, Joseph E. (2010): The Reality and Masquerade behind Bargaining over Welfare Pie Sizing, Delivery and Slicing.

Abstract

The present analysis addresses the apparently critical issue of circulation of wealth in society. Three actors play the game of welfare-related taxation. The first actor, in the role of Negotiator No.1, stands up for citizens’ legal and moral rights to primary needs. The second actor, in the role of Negotiator No.2, proceeds in response to public will for the provision and delivery of public goods. Quite the opposite, the third actor, hereinafter named the Voter, who represents the taxpayers, prefers personal consumption to moral understanding and public activity. In fact, backed by electoral maneuvering, the Voter emanates a risk to break down negotiations. The result of the simulation provides an evidence for the claim that a 50% median income is close enough to be considered a realistic choice of poverty line within the variety or rules of the alternating-offers bargaining game and conditions for unanimous consent of voter-citizens.

• Item Type: MPRA Paper
• Language: English
• Keywords: bargaining; policy; public goods; simulation; taxation; voting
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C78 - Bargaining Theory ; Matching Theory; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C71 - Cooperative Games; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H24 - Personal Income and Other Nonbusiness Taxes and Subsidies

References

1. Atkinson, A.B. (1987). On the measurement of poverty, Econometrica 55, 749–764.

2. Berliant, M. and H. Page, Jr. (1996). Incentives and income taxation: the implementation of individual revenue requirement functions, Ricerche Economiche, Vol. 50, No. 4, 389–400.

3. Black, D. (1948). On the Rationale of Group Decision Making, Journal of Political Economy, 56, 23-34.

4. Bowman, M.J. (1973). Poverty in an Affluent Society, Nell W. Chamberlain (ed.). Contemporary Economic Issues, R. D. Irwin, Inc., 51-113.

5. Buchanan, J.M. (1967). Public Finance in Democratic Process: Fiscal Institutions and Individual Choice, Vol. 4, Fiscal policy, LIBERTY FUND, INC. 8335 Allison Pointe Trail, Suite 300 Indianapolis, IN 46250-1684, 1999.

6. Cardona, D. and C. Ponsatí (2007). Bargaining one-dimensional social choices,Journal of Economic Theory, 137, 627 – 651.

7. Cherenin, V.P. (1962). Solution of some Combinatorial Problems of optimal Scheduling by the Method of Successive Computations, Proc. of Conf. on Experience and Prospective Applications of Mathematical Methods in Planning, [in Russian], Isd. SO AN SSR, Novosibirsk (1962), p. 111-113.

8. Ebert, U. (2008). Taking empirical studies seriously: the principle of concentration and the measurement of welfare and inequality, Social Choice and Welfare, Published online.

9. Eichenberger, R. and F. Oberholzer-Gee (1996). Rational Moralists, The Role of Fairness in Democratic Economic Politics, Institute for Empirical Economic Research, University of Zurich, 1996.

10. Feld, L.P. and B.S. Frey (2002). Trust Breeds Trust: How Taxpayers are Treated, Economics of Governance, Vol. 3, No. 3, 87–99.

11. Feldstein, M. (2008). Effects of Taxes on Economic Behavior, National Tax Journal, Vol. LXI, No.1, 131–139.

12. Formby, J. P. and S. G. Medema (1995). Tax Neutrality and Social Welfare in a Computational General Equilibrium Framework, Public Finance Review, Vol. 23, No. 4, 419–447.

13. Fuchs, V.R. (1965). Toward a theory of Poverty, in The Concept of Poverty, Task Force on economic Growth and Opportunity, U.S. Chamber of Commerce, 1965, 69-92.

14. Greve, B. (2008). What is Welfare? Central European Journal of Public Policy, Vol. 2, No.1, 50–73.

15. Hunter, B.H., Kennedy, S. and N. Biddle (2002). One size fits all?: The effect of equivalence scales on Indigenous and other Australian poverty, CAEPR Working Paper No. 19.

16. Kalai, E. (1977). Nonsymmetric Nash Solutions and Replications of 2-Person Bargaining, International Journal of Game Theory 6, 129 133.

17. Kesselman, J.R. and I. Garfinkel (1978). Professor Friedman, meet lady Rhys-Williams: NIT vs. CIT, Journal of Public Economy, 10, 179–216.

18. Malcomson, J.M. (1986). Some Analytics of the Laffer Curve, Journal of Public Economics 29, 263–279.

19, Mueller, D.C. (2003). Public choice III, ã Cambridge University Press.

20. Musgrave, R.A. (1959). The Theory of Public Finance, McGrew Hill, New York.

21. Narens, L. and R.D. Luce (1983). How we may have been misled into believing in the Interpersonal Comparability of Utility, Theory and Decisions 15, 247–260.

22. Nash, J.F. (1950). The Bargaining Problem, Econometrica 18, 155–162.

23. North, D.C. (2005). Institutions and the Performance of Economics Over Time, Ménard, C., and M. M. Shirley (eds.). Handbook of New Institutional Economics, Spriner: Dordrecht, Berlin, Heidelberg, 844pp.

24. Osborn, M.J. and A. Rubinstein (1990). Bargaining and Markets, Economic Theory, Econometrics, and Mathematical Economics, Academic Press, Inc., San Diego.

25. Ostrom, E. (2005). Doing Institutional Analysis: Digging Deeper than Markets and Hierarchies, Ménard, C., and M. M. Shirley (eds.). Handbook of New Institutional Economics, Spriner: Dordrecht, Berlin, Heidelberg, 844pp.

26. Peñalosa, C.G. and J.-F. Wen (2004). Optimal Redistribution in a Schumpeterian Growth Model, Preliminary Version, January 19.

27. Rawls, John A. (1971). A Theory of Justice, Revised edition, 2005, Belknap Press of Harvard University.

28. Richter, R. (2006). Book Reviews, Journal of Institutional and Theoretical Economics, Vol. 162, No.2, 384–388.

29. Roberts, K.W.S. (1977). Voting over income tax schedules, Journal of Public Economics 8, 329–340.

30. Roth, A.E. (1977). Individual Rationality and Nash’s Solution to the Bargaining Problem, Mathematics of Operations Research, Vol. 2, No. 1, 64-65; (1985). Game-theoretic models of bargaining, Ed., London New York, Cambridge University Press.

31. Rubinstein, A. (1998). Modeling Bounded Rationality, Zeuthen lecture book series, The MIT Press.

32. Saunders, P. (1997). Economic adjustment and distributional change: Income inequality in Australia in the eight-ies, in P. Gottshalk, B. Gustafsson and E. Palmer, Changing Patterns in the Distribution of Economic Welfare: An International Perspective, Cambridge University Press, pp. 68–83, esp. p. 70.

33. Sen, A.K. (1976). Poverty: An ordinal approach to measurement, Econometrica 44, 219–231.

34. Shapley L.S (1971). Cores of convex games, International Journal of Game Theory, vol. 1, no. 1, pp. 11–26.

35. Stewart, F. (2000). Income Distribution and Development, QEH Working Paper Series – QEHWPS37, Working Paper Number 37.