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From the definition of the Rawlsian approach

The Rawlsian approach to social welfare, built on the foundation of the “veil of ignorance” (Rawls, 1999, p. 118)

where "veil of ignorance" is

So, for example, the veil of ignorance would lead people to refuse slavery, because even though slavery is very convenient for slave-owners, for slaves, not so much, and since behind the veil of ignorance one would not know whether they would be a slave or a slave-owner, they would refuse slavery

From, my understanding, it means that people refuse slavery because they do not know whether they are slave or slave-owner

At this time, the uncertainty avoidance of behavioural economic also pops up on my head.

Ambiguity aversion, or uncertainty aversion, is the tendency to favor the known over the unknown, including known risks over unknown risks. For example, when choosing between two bets, we are more likely to choose the bet for which we know the odds, even if the odds are poor, than the one for which we don’t know the odds.

Is there any overlap between these two theories?

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    $\begingroup$ Note uncertainity avoidance, at least the vanilla one, is not behavioral economics, uncertainity avoidance is fully consistent with rationality, its a consequence of having concave utility function. Moreover, you are not only one who finds them similar, I even remember during my public policy seminar back during my Msc studies some student raised this question and teacher said its a common one, but as the +1 answer below explain the connection is not strong, also even people with high uncertainity avoidance are willing to take gambles if payoff is sufficiently high $\endgroup$
    – 1muflon1
    Aug 19, 2021 at 21:42
  • $\begingroup$ @great note, thanks 1muflon1, a lot of great discussion today :D $\endgroup$ Aug 19, 2021 at 23:45

1 Answer 1

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There is no apparent overlap between the two theories. I shall demonstrate their disparities in two ways:

Way number 1:

In the former, agents have no awareness of probability of outcome, and thus cannot make a decision based on that.

In the latter, agents have awareness of the probability of outcome for one of two bets, and prefer to choose it over the other bet which's probability is unknown.

We have to consider this a determining factor of disparity, as both definitions are very strict in what knowledge is given to their agents, but I will go on.

Way number 2

Behavioural Economics is a discipline within Economics which tries, with the assistance of human psychology and cultural/social factors to make sense of man's behaviour, should that be an irrational one. Within this framework, an agent's choices are his own, and individual choices vary. The result of the aggregation of these choices is a random point out of a continuous set of points in a distribution, or on a Cartesian coordinate system.

Rawls, whose work will most often be seen in Public Finance, considers that agents' behaviour will axiomatically work in the fashion he envisions - that is, there should be a unanimity about the optimal social welfare. The result of this axiomatic approach is - and always will be - the attentive care of whomever is the least well-endowed, or most vulnerable. Thus there is no randomness in the optimal Rawlsian choice, as it is only optimal if it is the last point on the distribution, or the lowest point on the coordinate system.


One should also consider if comparing bets to social rules is proper, as there seems to be an inherent difficulty in processing probability measured in utility (social rules) in comparison to processing probability measured in money (bets).

P.S.: What I know about Rawls' theory I have learnt from Public Finance - Rosen, Gayer

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  • $\begingroup$ Thanks a heap, S. Iason Koutsoulis, a very nice answer to me , I am wondering what does this sentence here mean, what is the agent in this sentence "an agent's choices are his own, and individual choices vary" $\endgroup$ Aug 19, 2021 at 23:56
  • $\begingroup$ In My behavioural aconomics, I normally study individual irrational behaviour so I am not that familiar with agent's behaviors tho. Do you mean the agents here are policy makers? $\endgroup$ Aug 19, 2021 at 23:57
  • $\begingroup$ So, in sum, there are two main differences between Rawlsian approach and uncertain ty avoidance: (1) in Rawlsian case, the agents do not know the probability of the outcomes while they know the probability of the outcomes in uncertainty avoidance. (2) The ultimate results of agent and individual choice is somewhat random while the ultimate results of Rawlsian policy mainly to head to support the least well-endowed. Is it a correct summary ? $\endgroup$ Aug 20, 2021 at 0:04
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    $\begingroup$ @NoviceMindset, Hello. In the quoted sentence, agents are what they usually are in economics, that is, "people". Specifically thinking people. These agents are not policy makers by definition, although policy makers are agents without doubt - however their method for making decisions is somewhat different. The summary is correct, although I am a bit more specific in my answer. $\endgroup$ Aug 20, 2021 at 6:41
  • $\begingroup$ Thanks a heap @S. lason Koutsoulis $\endgroup$ Aug 20, 2021 at 9:17

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