Findings

First class

Kevin Lewis

November 20, 2013

Growing Up in a Recession

Paola Giuliano & Antonio Spilimbergo
Review of Economic Studies, forthcoming

Abstract:
Does the historical macroeconomic environment affect preferences for redistribution? We find that individuals who experienced a recession when young believe that success in life depends more on luck than effort, support more government redistribution, and tend to vote for left-wing parties. The effect of recessions on beliefs is long-lasting. We support our findings with evidence from three different datasets. First, we identify the effect of recessions on beliefs exploiting time and regional variation in macroeconomic conditions using data from the 1972–2010 General Social Survey. Our specifications control for nonlinear time-period, life-cycle, and cohort effects, as well as a host of background variables. Second, we rely on data from the National Longitudinal Survey of the High School Class of 1972 to corroborate the age-period-cohort specification and look at heterogeneous effects of experiencing a recession during early adulthood. Third, using data from the World Value Survey, we confirm our findings with a sample of 37 countries whose citizens experienced macroeconomic disasters at different points in history.

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Hunger Games: Fluctuations in Blood Glucose Levels Influence Support for Social Welfare

Lene Aarøe & Michael Bang Petersen
Psychological Science, forthcoming

Abstract:
Social-welfare policies are a modern instantiation of a phenomenon that has pervaded human evolutionary history: resource sharing. Ancestrally, food was a key shared resource in situations of temporary hunger. If evolved human psychology continues to shape how individuals think about current, evolutionarily novel conditions, this invites the prediction that attitudes regarding welfare politics are influenced by short-term fluctuations in hunger. Using blood glucose levels as a physiological indicator of hunger, we tested this prediction in a study in which participants were randomly assigned to conditions in which they consumed soft drinks containing either carbohydrates or an artificial sweetener. Analyses showed that participants with experimentally induced low blood glucose levels expressed stronger support for social welfare. Using an incentivized measure of actual sharing behavior (the dictator game), we further demonstrated that this increased support for social welfare does not translate into genuinely increased sharing motivations. Rather, we suggest that it is “cheap talk” aimed at increasing the sharing efforts of other individuals.

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Material Welfare and Changing Political Preferences: The Case of Support for Redistributive Social Policies

Lindsay Owens & David Pedulla
Social Forces, forthcoming

Abstract:
The relationship between political preferences and material circumstances has stimulated one of the most vibrant discussions in the social sciences. However, the verdict is still out on the extent to which political preferences are a function of material circumstances, stable ideological commitments, or some combination thereof. Drawing on new panel data from the General Social Survey, we further this debate by examining whether becoming unemployed or losing income affects individuals' preferences for redistribution. Using individual-level fixed-effects models, we show that preferences for redistribution are malleable, rather than fixed, corresponding to predictions offered by a materialist perspective. Individuals want more redistribution when they experience unemployment or lose household income. Ultimately, we contribute new empirical insights that further the sociological understanding of the forces shaping political preferences.

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Economic Inequality and Democratic Support

Jonathan Krieckhaus et al.
Journal of Politics, forthcoming

Abstract:
Does economic inequality influence citizens’ support for democracy? Political economy theory suggests that in a country with high inequality, the majority of the population will support democracy as a potential mechanism for redistribution. Much of the survey and area-studies literature, by contrast, suggests that inequality generates political disillusion and regime dissatisfaction. To clarify this disagreement, we distinguish between prospective versus retrospective evaluations as well as between egocentric versus sociotropic evaluations. We test the resulting hypotheses in a multilevel analysis conducted in 40 democracies. We find that citizens are retrospective and sociotropic, meaning that higher levels of economic inequality reduce support for democracy amongst all social classes. We also find a small prospective egocentric effect, in that the reduction in democratic support in highly unequal countries is slightly less severe amongst the poor, suggesting they believe that democracy might increase future redistribution.

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Economic Elites, Investments, and Income Inequality

Michael Nau
Social Forces, December 2013, Pages 437-461

Abstract:
Stratification research documents that income inequality is on the rise. Common explanations include changes in technology, demography, and labor market institutions. This study documents an additional driver of inequality that has been critical to the concentration of income among elites: income from investments. As they have turned to their investment portfolios for income, economic elites have become less reliant on the returns to labor. This finding indicates that the current debate over elite incomes, which tends to focus on the rise of “the working rich,” needs to be expanded to include the role of income-producing wealth. Additionally, such changes have left a dramatic imprint on the entire income distribution, with investment income contributing to a growing share of overall income inequality. While family structure, labor markets, and technological change remain important topics in the study of income inequality, the findings presented here underscore the additional importance of wealth and property ownership.

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Decomposing Trends in Income Volatility: The “Wild Ride” at the Top and Bottom

Bradley Hardy & James Ziliak
Economic Inquiry, January 2014, Pages 459–476

Abstract:
We use 2-year panels from the Current Population Survey to provide a detailed accounting of family income volatility from 1980 to 2009. Volatility doubled overall, and the increase was most pronounced among the top 1% of the income distribution, but in any given year the level of volatility among the bottom 10% exceeds that of the top. The increased volatility comes from higher instability of head and spouse earnings, other nonlabor income, and from reduced covariance between these income sources with the tax system. This suggests that current tax policy is less effective in mitigating income shocks than previous decades.

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Rising Inequality: Transitory or Persistent? New Evidence from a Panel of U.S. Tax Returns

Jason Debacker et al.
Brookings Papers on Economic Activity, Spring 2013, Pages 67-142

Abstract:
We use a new, large, and confidential panel of tax returns to study the persistent-versus-transitory nature of rising inequality in male labor earnings and in total household income, both before and after taxes, in the United States over the period 1987-2009. We apply various statistical decomposition methods that allow for different ways of characterizing persistent and transitory income components. For male labor earnings, we find that the entire increase in cross-sectional inequality over our sample period was driven by an increase in the dispersion of the persistent component of earnings. For total household income, we find that most of the increase in inequality reflects an increase in the dispersion of the persistent income component, but the transitory component also appears to have played some role. We also show that the tax system partly mitigated the increase in income inequality, but not sufficiently to alter its broadly increasing trend over the period.

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Congress Promotes Perpetual Trusts: Why?

Lawrence Waggoner
University of Michigan Working Paper, September 2013

Abstract:
By unwittingly granting a tax exemption for perpetual trusts, Congress undermined state perpetuity law and promoted private trusts that can last and remain tax exempt for many centuries and maybe forever. As a direct result of Congress’s action, and then of lobbying by financial institutions and other interest groups to convince state legislatures to remove the obstacle of perpetuity law, the very wealthy can now create tax-exempt private trusts for generations upon generations of their descendants. And they are massively taking advantage of the opportunity. Congress as an institution has known of its blunder for years, but has failed — so far — to remedy its mistake. The author asks why. There is no federal interest in promoting perpetually tax-exempt trusts and, in fact, the federal interest cuts the other way. Tax revenues are lost by Congress’s action and subsequent inaction. A plausible explanation for Congress’s persistent indifference to the problem is that the revenue gain by correcting the oversight would be a long way off. Congress is not known for giving a high priority to problems of that sort. The longer Congress procrastinates, however, the amount of wealth that is safely sheltered in perpetually tax-exempt trusts — already estimated to be in the billions of dollars — continues to grow. The Treasury Department has a proposal before Congress for remedying the situation, but the Treasury’s proposal is not nearly as effective as it could and should be. The author proposes a remedy that would be entirely effective and would be consistent with the original purpose of the tax law.

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Wage dispersion and team performance: A theoretical model and evidence from baseball

Robert Breunig et al.
Applied Economics, Winter 2014, Pages 271-281

Abstract:
We develop a general theoretical model of the effect of wage dispersion on team performance which nests two possibilities: wage inequality may have either negative or positive effects on team performance. A parameter which captures the marginal cost of effort, which we estimate using game-level data from Major League Baseball, determines whether wage dispersion and team performance are negatively or positively related. We find low marginal cost of effort; consequently, wage disparity is negatively related to team performance. Game and season-level regressions also indicate a negative relationship between inequality and performance. We discuss a variety of interpretations of our results.

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Multi-Generational Income Disadvantage and the Educational Attainment of Young Adults

Patrick Wightman & Sheldon Danziger
Research in Social Stratification and Mobility, forthcoming

Abstract:
We use data from three generations of participants of the Panel Study of Income Dynamics to examine the association between intergenerational socio-economic mobility and young adult outcomes. In particular, we investigate whether parents’ childhood conditions are associated with the educational attainment of their young adult children, conditional on young adults’ own childhood conditions. We examine the degree to which different paths leading to the same socio-economic position may differentially influence the outcomes of children raised under otherwise similar circumstances. We find some evidence that, conditional on young adults’ own adolescent conditions, the adolescent conditions of their parents influence their household environment and by extension their educational attainment. This association appears to be concentrated among low-income households.

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The Relativity of Decreasing Inequality Between Countries

Kristof Bosmans, Koen Decancq & André Decoster
Economica, forthcoming

Abstract:
We study the evolution of population-weighted between-country inequality in the period 1980–2009. Whereas previous studies almost exclusively focused on relative inequality measures, we consider relative, absolute and intermediate versions of the Lorenz dominance criterion and of the S-Gini and generalized entropy classes of inequality measures. The analysis yields robust evidence for increasing absolute inequality. Moreover, this conclusion is preserved for intermediate views substantially in the direction of the relative view. In contrast, robust evidence for decreasing inequality — be it relative, absolute or intermediate — is virtually absent. These findings challenge the widely accepted claim of decreasing between-country inequality.

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The World Distribution of Income And Its Inequality, 1970–2009

Paolo Liberati
Review of Income and Wealth, forthcoming

Abstract:
This paper provides a full decomposition of world inequality, as measured by the Gini coefficient, in the period 1970–2009. In particular, using the Analysis of Gini (ANOGI), the paper describes the evolution of between inequality, within inequality, and the impact of overlapping on both factors. While there is evidence that between inequality in the last decade significantly declined due to the rapid Chinese growth, within inequality and overlapping went in the opposite direction. Furthermore, with the exception of some Asian countries, the rest of the world has not moved significantly. As a result, world inequality remains high by any standard.

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Age at Childbearing over Two Generations and Grandchildren's Cognitive Achievement

Paula Fomby, Patrick Krueger & Nicole Wagner
Research in Social Stratification and Mobility, forthcoming

Abstract:
We examine whether grandparents’ and parents’ ages at birth are associated with grandchildren's early cognitive achievement, and whether grandparents’ or parents’ socioeconomic status, health, and marital status mediate those associations. Our analysis is based on data from the Panel Study of Income Dynamics and its Child Development Supplement. A grandparent's age at the birth of their own children is robustly and positively associated with grandchildren's verbal achievement, but not with grandchildren's applied mathematics achievement, after controlling for parents’ age at the grandchild's birth. The associations are similar in magnitude for grandmothers and grandfathers. A variety of indicators of social class in the grandparent and parent generations did not mediate this age effect. However, many of those indicators of grandparents’ social class were directly or indirectly related to grandchildren's achievement.

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The Influence of Major Life Events on Economic Attitudes in a World of Gene-Environment Interplay

Peter Hatemi
American Journal of Political Science, October 2013, Pages 987–1007

Abstract:
The role of “genes” on political attitudes has gained attention across disciplines. However, person-specific experiences have yet to be incorporated into models that consider genetic influences. Relying on a gene-environment interplay approach, this study explicates how life events, such as losing one's job or suffering a financial loss, influence economic policy attitudes. The results indicate genetic and environmental variance on support for unions, immigration, capitalism, socialism, and property tax is moderated by financial risks. Changes in the magnitude of genetic influences, however, are temporary. After two years, the phenotypic effects of the life events remain on most attitudes, but changes in the sources of individual differences do not. Univariate twin models that estimate the independent contributions of genes and environment on the variation of attitudes appear to provide robust baseline indicators of the sources of individual differences. These estimates, however, are not event or day specific. In this way, genetic influences add stability, while environment cues change, and this process is continually updated.

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Capuchin monkeys (Cebus apella) fail to show inequality aversion in a no-cost situation

Mark Sheskin et al.
Evolution and Human Behavior, forthcoming

Abstract:
Although humans show robust equality concerns across a variety of situations, there is ongoing debate regarding the extent to which any nonhuman species is inequality averse. In the current research, we test non-human primates’ reactions to conspecifics receiving equal and unequal payoffs using a “no-cost” method in which subjects can respond to inequality without rejecting food. Specifically, we gave capuchin monkeys (Cebus apella) the opportunity to trade with one of two experimenters, each of whom offered the subject an identical reward, but had different histories of trading with the subject and a conspecific partner. An “equal” experimenter had previously given a conspecific the same reward that the subject had received, whereas the other experimenter was either an “advantageous trader” for the subject (giving the conspecific an inferior reward) or a “disadvantageous trader” for the subject (giving the conspecific a superior reward). By offering subjects a choice between experimenters, we removed several competing demands that may have masked the expression of robust equality preferences in previous studies. Even though there was no cost associated with expressing an equality preference, we found no evidence that capuchins differentiated between equal and unequal experimenters.

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Government quality, egalitarianism, and attitudes to taxes and social spending: A European comparison

Stefan Svallfors
European Political Science Review, November 2013, Pages 363-380

Abstract:
The paper analyses how perceptions of government quality – in terms of impartiality and efficiency – impact on attitudes to taxes and social spending. It builds on data from the European Social Survey 2008 from 29 European countries. The paper shows a large degree of congruence between expert-based judgments and the general public's perceptions of the quality of government. It also shows that the quality of government has a clear, independent effect on attitudes to taxes and spending, so that people who perceive institutions as efficient and fair want higher taxes and spending. But government quality also conditions the impact of egalitarianism on attitudes to taxes and spending: in high-quality-of-government egalitarianism has a clearly stronger impact on these attitudes. It is concluded that government quality is an important and so far neglected factor in explaining attitudes to welfare policies.

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Welfare States and the Redistribution of Happiness

Hiroshi Ono & Kristen Schultz Lee
Social Forces, December 2013, Pages 789-814

Abstract:
We use data from the 2002 International Social Survey Programme, with roughly 42,000 individuals nested within twenty-nine countries, to examine the determinants of happiness in a comparative perspective. We hypothesize that social democratic welfare states redistribute happiness among policy-targeted demographic groups in these countries. The redistributive properties of the social democratic welfare states generate an alternate form of “happiness inequality” in which winners and losers are defined by marital status, presence of children, and income. We apply multilevel modeling and focus on public social expenditures (as percentage of GDP) as proxy measures of state intervention at the macro level, and happiness as the specific measure of welfare outcome at the micro level. We find that aggregate happiness is not greater in the social democratic welfare states, but happiness closely reflects the redistribution of resources in these countries. Happiness is redistributed from low-risk to high-risk individuals. For example, women with small children are significantly happier, but single persons are significantly less happy in the welfare states. This suggests that the pro-family ideology of the social democratic welfare states protects families from social risk and improves their well-being at the cost of single persons. Further, we find that the happiness gap between high- versus low-income earners is considerably smaller in the social democratic welfare states, suggesting that happiness is redistributed from the privileged to the less privileged.

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Class Origin and Elite Position of Men in Business Firms in Sweden, 1993–2007: The Importance of Education, Cognitive Ability, and Personality

Erik Bihagen, Magnus Nermo & Charlotta Stern
European Sociological Review, October 2013, Pages 939-954

Abstract:
Using Swedish registry data, we study the impact of class origin on becoming part of the business elite between 1993 and 2007 for men aged 35–44 years. The elite is defined as the top 1 per cent of wage earners within large firms. We find a clear working class disadvantage and, with time, a polarization between those of working class origin and others. Decomposition analyses indicate that differences in educational attainment levels cause a large part of the gap, but less so over time. Differences in personality traits measured at around the age of 18 years also help explain the class origin differentials, and more so over time. The decomposition analyses indicate that the net effect of cognitive abilities is small. The results suggest a change in the value of education and personality in the labour market over time, but as men of working class origins have disadvantages in both domains, the relative disadvantage of coming from the working class was rather stable during the period 1993–2007.

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Money, Well-Being, and Loss Aversion: Does an Income Loss Have a Greater Effect on Well-Being Than an Equivalent Income Gain?

Christopher Boyce et al.
Psychological Science, forthcoming

Abstract:
Higher income is associated with greater well-being, but do income gains and losses affect well-being differently? Loss aversion, whereby losses loom larger than gains, is typically examined in relation to decisions about anticipated outcomes. Here, using subjective-well-being data from Germany (N = 28,723) and the United Kingdom (N = 20,570), we found that losses in income have a larger effect on well-being than equivalent income gains and that this effect is not explained by diminishing marginal benefits of income to well-being. Our findings show that loss aversion applies to experienced losses, challenging suggestions that loss aversion is only an affective-forecasting error. By failing to account for loss aversion, longitudinal studies of the relationship between income and well-being may have overestimated the positive effect of income on well-being. Moreover, societal well-being might best be served by small and stable income increases, even if such stability impairs long-term income growth.

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The Tertiary Tilt: Education and Inequality in the Developing World

Lloyd Gruber & Stephen Kosack
World Development, February 2014, Pages 253–272

Abstract:
Education is widely perceived to be a tonic for the rising inequality that often accompanies development. But most developing-country governments tilt their education spending toward higher education, which disproportionately benefits elites. We find that in countries with high “tertiary tilts,” rising primary enrollment is associated a decade later with far higher inequality — not the lower Gini coefficients many would expect. Since most developing countries tilt their spending toward higher education, our analysis suggests that efforts that concentrate only on expanding mass education, such as the UN’s Millennium Campaign, could end up raising inequality in much of the developing world.

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Policy Representation, Social Representation and Class Voting in Britain

Oliver Heath
British Journal of Political Science, forthcoming

Abstract:
Why does the strength of class voting vary over time? Recent research has emphasized factors related to the structure of political choice at the party level. This article examines different aspects of this choice, and investigates whether voters are more likely to respond to the social or policy cues that parties send voters. The results from the British context suggest that the former are more important than the latter. The central implication of this finding is that social representation matters, and that the social background of political representatives influences how voters relate to political parties.

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Intra-generational social mobility and educational qualifications

Ian Plewis & Mel Bartley
Research in Social Stratification and Mobility, forthcoming

Abstract:
The relation between intra-generational social class mobility of parents and their children's subsequent educational qualifications, and the implications of this relation for educational stratification, is explored by fitting statistical models to data from two UK longitudinal datasets: one based on the UK Census (ONS LS) and the 1970 birth cohort study (BCS70). Children whose parents are upwardly mobile gain higher educational qualifications than their peers in their class of origin, but obtain lower qualifications than their peers in their class of destination. The reverse pattern is observed for the downwardly mobile. These results mirror those obtained for the relation between adult intra-generational social mobility and a number of widely used measures of health. The implications of the findings for different explanations of the social class gradient in educational attainment are examined. The findings provide greater support for theoretical explanations of educational inequalities that are based on differences in economic circumstances between social classes than they do for explanations based on social class variations in the levels of cultural capital and aspirations. This conclusion is strengthened by the fact that the overall pattern of results from these analyses is unchanged after statistically controlling for levels of parental education. The findings also have methodological implications for measuring the social class gradient in attainment and qualifications.

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Class mobility across three generations in the U.S. and Germany

Florian Hertel & Olaf Groh–Samberg
Research in Social Stratification and Mobility, forthcoming

Abstract:
Based on data from the Panel Study of Income Dynamics and the Socio-economic Panel, we study the class mobility of three concurrent generations in the U.S. and Germany. We find that, in both countries, the grandfathers’ class is directly associated with their grandchildren's social position. We propose three possible mechanisms which could explain the observed multigenerational mobility patterns. First, we consider the role of class-specific resources for mobility strategies. Second, we suggest a more general explanation by integrating grandparents’ class into the reference frame for mobility decisions. Third, we argue that multigenerational class associations could be the result of categorical inequality based on race or ethnicity. We find that outflow mobility rates differ across grandfathers’ class positions. Three-generational immobility is most frequent in lower and higher class positions. Log-linear analyses show that, in both countries, significant grandfather effects foster immobility within most classes and limit mobility between the working and service classes in Germany specifically. These effects partially lose significance if we only study white Americans and native Germans. Combining the two national mobility tables, we find that the pattern of three-generational mobility is similar in both countries.

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Inequality across Three and Four Generations in Egalitarian Sweden: 1st and 2nd Cousin Correlations in Socio-Economic Outcomes

Martin Hällsten
Research in Social Stratification and Mobility, forthcoming

Abstract:
This paper estimates intergenerational associations in outcomes across more than two generations using cousin correlations. These correlations account for both observed and unobserved factors that cousins share, i.e., the joint influence of family and the community they are exposed to. The results show 1st cousin correlations in GPA, cognitive ability, and years of education above .15. For occupational prestige, the correlations was found to be close to .10. Accounting for detailed parental socio-economic characteristics reduces the correlations by merely one third to one half, which suggest that grandparents contribute over and above parents. For 2nd cousins, sample restriction allows only the study of correlations in 9th grade GPA. The 2nd cousin correlation is estimated to .07 unadjusted and .05 after adjusting for detailed parental characteristics. For 1st and 2nd cousins of grandparent with great economic wealth, the correlations double or triple, and remain very large even after parental characteristics are controlled for. In sum, this indicates strong persistence of inequality across at least four generations in contemporary Sweden.

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Intergenerational Determinants of Income Level in Finland

Outi Sirniö, Pekka Martikainen & Timo Kauppinen
Social Forces, December 2013, Pages 463-490

Abstract:
This study estimates the level of intergenerational transmission of income in Finland and assesses the contribution of parental and personal socioeconomic and demographic characteristics to this relationship. We used a longitudinal register-based data set covering two decades and selected cohorts born between 1973 and 1976 for analysis. The results demonstrate strong intergenerationality, with those from the lowest and highest income quintiles being the most probable to remain in the same income quintile in adulthood. Approximately half of these associations are attributable to parental characteristics among men and by personal characteristics among women. Our results further show complex interactive effects, with higher-income parents unable to entirely protect their offspring from the negative impact that unemployment, single parenting, and living alone has on personal income levels. These findings demonstrate significant and multifaceted intergenerational continuities in income level even in a Nordic welfare state such as Finland.

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Expanding the Inner Circle: How Welfarist Norms Escape In-Groups

Alex Jakle
University of Michigan Working Paper, July 2013

Abstract:
I explore the influence of social mechanisms by which welfarist norms come to be appropriate by those outside the social group for which they were developed, and how they lead to patterned deviance from the law. Drawing on literature from law and society, law and economics, political science, social theory, and other fields, I use original research from a qualitative study of amateur baseball players to analyze the interplay between norms, groups, and deviance. Relationships with agents is widespread, despite being against both NCAA Bylaws and most players economic incentives. To explain this seemingly irrational pattern of rule-breaking, I argue that agent use arose to serve the economic interests of elite players and agents, and so became a badge of elite status. Players wishing to act as an elite appropriate this behavior despite variation in their incentives. I explain how players' narrative identities, psychological self-deception, aspirational behavior, and social roles lead them to adopt elite behavior and perpetuate a norm that does not serve their own material or economic ends.

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A Satisfactory Minimum Conception of Justice: Reconsidering Rawls's Maximin Argument

Alexander Kaufman
Economics and Philosophy, November 2013, Pages 349-369

Abstract:
John Rawls argues that it is possible to describe a suitably defined initial situation from which to form reliable judgements about justice. In this initial situation, rational persons are deprived of information that is ‘irrelevant from the standpoint of justice’. It is rational, Rawls argues, for persons choosing principles of justice from this standpoint to be guided by the maximin rule. Critics, however, argue that (i) the maximin rule is not the appropriate decision rule for Rawls's choice position; (ii) the maximin argument relies upon an imprecise account of the satisfactory minimum to be secured under the maximin rule; or that (iii) Rawls relies upon unrealistic assumptions about diminishing marginal value. These critics, I will suggest, argue from a number of assumptions that are confused or false. The satisfactory minimum that choosers in the original position – employing the maximin rule – seek to achieve is not a minimum level of primary goods, nor is the satisfactory minimum sought under the maximin rule supplied by the difference principle. I will argue that the maximin argument is more robust than has generally been recognized and that this argument performs a number of important functions in clarifying the nature and implications of Rawls's argument for justice as fairness.


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