Pigou-Dalton principle, well-being, equity, metrics, social welfare function, welfarism, inequality, poverty
Behavioral Economics | Law | Social Welfare
Can we measure inequity? Can we arrive at a number or numbers capturing the extent to which a given society is equitable or inequitable? Sometimes such questions are answered with a “no”: equity is a qualitative, non-numerical consideration.
This Article offers a different perspective. The difficulty with equity measurement is not the impossibility of quantification, but the overabundance of possible metrics. There currently exist at least four families of equity-measurement frameworks, used by scholars and, to some extent, governments: inequality metrics (such as the Gini coefficient), poverty metrics, social-gradient metrics (such as the concentration index), and equity-regarding social welfare functions. Inequality metrics look at the population-wide distribution of income or some other valuable good. Poverty metrics focus on the extent to which individuals fall below an income threshold, or are deprived in other ways. Social-gradient metrics quantify the correlation between goods (in particular, good health) and social status. Equity-regarding social welfare functions seek to translate each individual’s bundle of attributes into a “utility” number, measuring her well-being; and then rank situations so as to give extra weight to improvements in the utility of those at a low utility level.
So which of these is the most attractive equity metric? How shall we choose among them? This Article tries to make progress on these questions. I show how all four families share a deeper unity: all satisfy the “Pigou-Dalton” principle in some form, favoring a non-leaky transfer of some valuable “currency” from those with more to those with less. The metrics differ in the specific version of the Pigou-Dalton principle that they embody: how they identify the valuable “currency,” and whether they restrict the scope of that principle. Thus, in choosing among equity metrics, we should be guided by the lodestar question: what are the grounds for specifying the Pigou-Dalton principle in this way rather than that? This question, in turn, helps us see how the diversity of current equity metrics flows from intellectual contestation about the nature and measurement of well-being, and about the conditions under which individuals are responsible for being badly off.
Matthew D. Adler, Equity by the Numbers: Measuring Poverty, Inequality, and Injustice, (April 2013)