Prizes are the wages of merit


#1

Should a graduate student earn more money than an undergraduate? Extra hours at work should be paid? Does a talented actor shouldn’t be rewarded to get the lead role in a movie?

Through the pages of our book we have been trying to answer who gets what? However, we must remember that Pareto efficiency by definition doesn’t allow us to compare utilities. However, in chapter 9 we find three different approaches to maximize social welfare, the utilitarian social welfare function (revised in chapter 8), maxmin criterion and the principle of just deserts.

I totally agree with the fact that individual choices matter the most, because in the end individuals act autonomously, just as we revised in chapter 7 Kantian equilibrium. In fact, what Mankiw’s principle of just deserts maintains is actually how can I answer yes to the three initial questions. Yes, because in Mankiw approach an individual should be rewarded in proportion to his contribution to the society. In this way we can say that some individuals will be better off because they can profit from inborn talent.

I understand that inborn talent here is an example of inequitable allocation of private endowments, and the changes in endowments will lead to the changes in individual deserts. So this argument makes it totally possible to understand why smart students deserve better grades, great athletes deserve to win, researches deserve to earn recognition for their findings etc. accordingly to this I disagree with the maxmin criterion because Rawls treats utility functions as unworthy, and as stated before individual choices matter, so utility functions are in the contrary worthy.

Norton and Ariely stated that individuals demand an unequal society, but just as I said before individuals have different preferences, and it looks like we can’t disregard inequality in our models. Individuals act autonomously, and we might can arrive to higher social welfare solutions more likely implying a model like Kantian cooperation. So it seems we can’t even out the inequalities in life!

Bibliography

http://gregmankiw.blogspot.mx/2006/04/on-just-deserts.html

http://econlog.econlib.org/archives/2005/08/the_economics_a_1.html