I. Game Theory aud Rawls versus the utilitarians
a. Suppose, Jane a libertarian subscribing hi Nozick's cntillernunt theory, which we will discuss [Hier i n the course, in trying to scoff at the idea that there is a difference between Rawl's egalitarian principles ofjustice and utilitarian ideals, states, Editor viewing the. below table, "set, there's no dill-cm-rice betwam the utilitarians and the Rawlsians, when laced with the below payoirmatrices bc]cw both Mena (player and Raj (player 2) will choose exactly the same policies anyway." Is .111130 correct"? Why or why not?
| (Mena, Raj) (Rawls world) |
Build a bridge policy |
Health care policy |
| Build a bridge policy |
(2, 2) |
(0, 0) |
| Health care policy |
(0, 0) |
(1, 1) |
Figure 1
| (Mena, Raj) (Rawls world) |
Build a bridge policy |
Health care policy |
| Build a bridge policy |
(4, 4) |
(3, 3) |
| Health care policy |
(3, 3) |
(2, 2) |
Figure 2
II Rawls Economic Justice and Pollution
Pollution - including greenhouse as Luriissioris and the problem of global warming (which are the two distinct economic justice problems, the biggest in human histork as we will see soon enough) poses a number in interesting challenges in matters of economic justice.
This first exercise asks you to do some very simple economic analysis that will show just how difficult economic justice questions are More importantly, this exercise will show you why pratticai economic policy making is extremely difficult even in clear cut case because justice corisiderations simply cannot be set aside (as is routinely done in most economics comes).
The Predicament
Smallville has a thriving poultry industry which also means that the town stinks most of the time. Sum is located in a warm part of the nation, so that stench of chicken production is a major problem, especially for poor people who cannot afford to live far from their place.
As you know: poultry production also poisons water supplies and the land around a chicken processing plant (the seepage from cutting the chickens and the sloppy disposal of carcasses, blood and tainted water) Finally, workers in chicken processing plants suffer high rates or injury and illness (it is hard to automate chicken processing and the cutting pmc.ess leads to workers' regularly injuring themselves on very, fast assembly lines and being infected by chicken Wood and the various bacteria and viruses that are evolving in the plant - proofot- evolution is available on the fluor of any major chicken processor and in the bodies {tit many very sick work errs, whose ailments are frequently the result of new forms of human and 4:MS5.D vcr viruses developing in the plants).
Suppose the the market for chicken in Smallville is described by the following ikrnand and supply equations:
Demand: p = 5 - 0.08Q
Supply: p = 1 (a flat supply curve and assume that prices are cqudi to marginal costs)
where Q is measured in million of pounds and p is in dollars, So, it costs processors 1 dollar to produce a standard pound of chicken (non-standard pounds so into dog food, processed deli meats and other stuff you really do nut. want to eat). Further, suppose that the social costs associated with each pound of chicken produeed. is $0.50. The free mark.et fur chicken is reprusented by the diagram below
Each chicken sector worker produces an average of 50,000 pounds et. standard chicken a year, working 40 hours a week for 40 weeks on average. (Chicken workers are usually quite sick for the rest of the time They have no sick days -- so when they are sick they do not get paid Their employers do not provide thcen with health insurance and they do not usually have union protection, so the Costs of health care are borne entirely by workers in the Form of lost pay and high medical hills as well as very long and not infrequently lethal waits at overcrowded public hospitals or, in many caws., faith healers.)
Question 1
What is the free market price and quantity of chicken? What is the wage of the average chicken worker in the free market situation? What is the efficient configuration oldie price and quantity of chicken once proper account is taken of the cost of all of the negative externalities?
Quotion 2
What are the total annual social costs of the externalities associated with chicken production in the free market situation? What is the ratio of the total social costs to the wage income or workers in the free marke? What is the per employed worker cost oldie negative externalities? (This is an implicit tax on workers in Smallville.)
Question 3
What would a Rawlsian view of the negative externalities associated with chicken production be? Is this a violation of his first principle of justice? His second principle of justice?
Question 4
The town of smallville is considering the following measures to help its chicken sector workers -- who are the vast majority of workers in the curnmuriity!
1. A $0.50 per pound poultry tax on chicken to be paid by producers
2. A system or marketable pollution permits that allows a chicken firm to produce 10.000 pounds of chicken per permit.
The permit system and the tak yield the same total revenue annually.
If the real rate of interest in the economy is 2%, what is the market price of a permit? (rt.-member the market value of an asset is the present value or a. constant infinite strewn of. payments of SR per ye=ar in perpetuity equal to .R..2r where r is the real rate of interest in the economy) Which of these systems for pricing the negative externalities of chicken production are consistent with a Rawlsian or Sun based egalitarian liberal view'? (the creation o a permit system effectively turns a social bad -- pollution -- into an economic.
Asset and a form of tradeable property.) (Extra credit- what Niou Id be the Libertarian view of thesP policies?)
Question 5
A business columnist attacks all of the aliartmentioned proposals as job killers, and claims that there is no economic justice question here because wormers have choosing to wurk in chicken processing in SmallvilIe. She writes that " so long as everyone is free, then we must rely on the seif-interest of workers to guide us in these matters Workers Life making an informed choice to labor in the processing plants, which must mean that they believe that cracking chicken is their best option. Worse these proposals will throw many peopk out of work, thereby robbing them of what little income and opportunity they do have!" Is there anything is wrong with this argument from a Rawlsian or Sen based egalitarian liberal view?
Supplementary material:
1. Wage of average worker: w= p*MPL where MPL is equal to level of output per worker (some pounds of chicken per year)
2. Wage income- wL, assume 0 economic long run profits (flat supply curve, and profits= pq-wL, so 0=pq-wL and pq-wL
3. Permit-internalize externality, costs per permit at per pound=externality price