Publication: What Can Economists Explain by Taking into Account People's Perceptions of Fairness? Punishing Cheats, Bargaining Impasse, and Self-Perpetuating Inequalities
Loading...
Files in English
172 downloads
Date
2005
ISSN
Published
2005
Author(s)
Editor(s)
Abstract
A standard hypothesis in economics, the rational self-interest hypothesis, is based on a radically simplified view of human nature that says individuals are exclusively motivated by their material self-interest and unboundedly rational in the pursuit of it. Yet experimental evidence overwhelmingly refutes this hypothesis. Evidence abounds that individuals have preferences for being treated and treating others fairly. These preferences do not affect economic outcomes in competitive markets with standardized products but do affect economic outcomes in a wide variety of other settings where information is imperfect or enforcement is costly. Also discussed are 1) how preferences for fairness can solve a free rider problem, 2) the pitfalls of human concern for fairness, and 3) how extreme inequality can be perpetuated through belief systems that represent oppression as "fair".
Link to Data Set
Citation
“Hoff, Karla. 2005. What Can Economists Explain by Taking into Account People's Perceptions of Fairness? Punishing Cheats, Bargaining Impasse, and Self-Perpetuating Inequalities. © World Bank. http://hdl.handle.net/10986/9251 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Cash Transfers for Older People Reduce Poverty and Inequality(Washington, DC: World Bank, 2004)The development of non-contributory pension program as institutions for poverty and inequality reduction in Brazil, South Africa and Bangladesh is examined.Publication Caste and Punishment : The Legacy of Caste Culture in Norm Enforcement(2009-09-01)Well-functioning groups enforce social norms that restrain opportunism, but the social structure of a society may encourage or inhibit norm enforcement. This paper studies how the exogenous assignment to different positions in an extreme social hierarchy - the caste system - affects individuals' willingness to punish violations of a cooperation norm. Although the analysis controls for individual wealth, education, and political participation, low-caste individuals exhibit a much lower willingness to punish norm violations that hurt members of their own caste, suggesting a cultural difference across caste status in the concern for members of one s own community. The lower willingness to punish may inhibit the low caste s ability to sustain collective action and so may contribute to its economic vulnerability.Publication Asset Inequality and Agricultural Growth: How Are Patterns of Asset Inequality Established and Reproduced?(Washington, DC: World Bank, 2005)The relationship between distributions of asset inequality, how these distributions are created and maintained, and agricultural growth are explored. The paper studies Ethiopian agriculture to investigate how differential access to productive assets in the agricultural sector, at various levels (regional, community and household), effect inequalities in agricultural outcomes in terms of productivity and poverty. The dominant discourse on agricultural productivity and distribution has been largely focused on input-output relationships, defined and measured with a yardstick specific to economics. In this study, the processes and institutions that link inequality and productivity are explored. In the Ethiopian case, the persistent nature of inequality is causally related to historical choices and path dependency. What is observed is a complex system whereby inequality affects growth which in turn reinforces processes that exacerbate and reproduce inequalities.Publication Inequality Is Bad for the Poor(Washington, DC: World Bank, 2005)It has been argued that inequality should be of little concern in poor countries on the grounds that 1) absolute poverty in terms of consumption (or income) is the overriding issue in poor countries and 2) the only thing that really matters to reducing absolute income poverty is the rate of economic growth. The author takes 1) as given but questions 2). He argues that there are a number of ways in which the extent of inequality in a society, and how it evolves over time, influences the extent of poverty today and the prospects for rapid poverty reduction in the future.Publication The Links between Finance and Inequality: Channels and Evidence(Washington, DC: World Bank, 2005)Much attention has been given to whether market reforms reduce or increase inequality. Inequality often reflects unequal access to productive opportunities and recent evidence has highlighted the presence of onerous barriers to entry, especially in developing countries. This paper focuses on the relationships between inequality and finance. In principle, a better financial system can help overcome barriers, and thereby increase economic growth and reduce inequality. It analyzes these various channels from inequality to financial sector reform and provides (case) evidence on them. The question of, how, given initial wealth and power distributions, financial (and other) reforms could be designed to improve access and prevent perverse outcomes. It concludes that more gradual reform allowing the buildup of various types of oversight institutions is necessary for countries with high inequality.
Users also downloaded
Showing related downloaded files
Publication Argentina Country Climate and Development Report(World Bank, Washington, DC, 2022-11)The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentina’s growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentina’s potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentina’s context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the country’s growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.Publication Lebanon Economic Monitor, Fall 2022(Washington, DC, 2022-11)The economy continues to contract, albeit at a somewhat slower pace. Public finances improved in 2021, but only because spending collapsed faster than revenue generation. Testament to the continued atrophy of Lebanon’s economy, the Lebanese Pound continues to depreciate sharply. The sharp deterioration in the currency continues to drive surging inflation, in triple digits since July 2020, impacting the poor and vulnerable the most. An unprecedented institutional vacuum will likely further delay any agreement on crisis resolution and much needed reforms; this includes prior actions as part of the April 2022 International Monetary Fund (IMF) staff-level agreement (SLA). Divergent views among key stakeholders on how to distribute the financial losses remains the main bottleneck for reaching an agreement on a comprehensive reform agenda. Lebanon needs to urgently adopt a domestic, equitable, and comprehensive solution that is predicated on: (i) addressing upfront the balance sheet impairments, (ii) restoring liquidity, and (iii) adhering to sound global practices of bail-in solutions based on a hierarchy of creditors (starting with banks’ shareholders) that protects small depositors.Publication The Journey Ahead(Washington, DC: World Bank, 2024-10-31)The Journey Ahead: Supporting Successful Migration in Europe and Central Asia provides an in-depth analysis of international migration in Europe and Central Asia (ECA) and the implications for policy making. By identifying challenges and opportunities associated with migration in the region, it aims to inform a more nuanced, evidencebased debate on the costs and benefits of cross-border mobility. Using data-driven insights and new analysis, the report shows that migration has been an engine of prosperity and has helped address some of ECA’s demographic and socioeconomic disparities. Yet, migration’s full economic potential remains untapped. The report identifies multiple barriers keeping migration from achieving its full potential. Crucially, it argues that policies in both origin and destination countries can help maximize the development impacts of migration and effectively manage the economic, social, and political costs. Drawing from a wide range of literature, country experiences, and novel analysis, The Journey Ahead presents actionable policy options to enhance the benefits of migration for destination and origin countries and migrants themselves. Some measures can be taken unilaterally by countries, whereas others require close bilateral or regional coordination. The recommendations are tailored to different types of migration— forced displacement as well as high-skilled and low-skilled economic migration—and from the perspectives of both sending and receiving countries. This report serves as a comprehensive resource for governments, development partners, and other stakeholders throughout Europe and Central Asia, where the richness and diversity of migration experiences provide valuable insights for policy makers in other regions of the world.Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication World Development Report 2006(Washington, DC, 2005)This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.