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Incomplete social contracts

Aghion, P.; Bolton, P.; (2003) Incomplete social contracts. Journal of the European Economic Association , 1 (1) pp. 38-67. 10.1162/154247603322256765. Green open access

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There is a long normative ‘Social Contract’ tradition that attempts to characterize ex-post income inequalities that are agreeable to all ‘behind a veil of ignorance.’ This paper takes a similar normative approach to characterize social decision-making procedures. It is shown that quite generally some form of majority-voting is preferred to unanimity ‘behind a veil of ignorance’ whenever society faces deadweight costs in making compensating transfers. Deviations from unanimity (or ex-post Pareto optimality) are exante efficient to the extent that they economize on costly compensating transfers. Put another way, the optimal decision rule trades off the benefits of minority protection and those from greater flexibility.

Type: Article
Title: Incomplete social contracts
Open access status: An open access version is available from UCL Discovery
DOI: 10.1162/154247603322256765
Publisher version: http://dx.doi.org/10.1162/154247603322256765
Language: English
Additional information: © 2003 The MIT Press
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/17702
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