Second-Best Fairness: The Trade-off between False Positives and False Negatives
American Economic Review
vol. 113,
no. 9, September 2023
(pp. 2458-85)
Abstract
A main focus in economics is how to design optimal policies in second-best situations, which often requires a trade-off between giving some individuals more than they deserve, false positives, and others less than they deserve, false negatives. This paper provides novel evidence on people's second-best fairness preferences from large-scale experimental studies in the United States and Norway. The majority of people are more concerned with false negatives than with false positives, but we document substantial heterogeneity in second-best fairness preferences between the countries and across the political spectrum. The findings shed light on the political economy of social insurance and redistribution.Citation
Cappelen, Alexander W., Cornelius Cappelen, and Bertil Tungodden. 2023. "Second-Best Fairness: The Trade-off between False Positives and False Negatives." American Economic Review, 113 (9): 2458-85. DOI: 10.1257/aer.20211015Additional Materials
JEL Classification
- D63 Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D78 Positive Analysis of Policy Formulation and Implementation
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs