Social Planning and Economic Coercion

Arbeitspapier

We develop a theory of social planning with a concern for economic coercion, which we define as the difference between consumers' actual utility, and the counterfactual utility they expect to obtain if they were able to set policy themselves. Reasons to limit economic coercion include protecting minorities, preventing disenfranchised groups from engaging in socially costly behavior, or political economy considerations. As long as consumers are fully rational, limiting coercion is equivalent to placing more welfare weight on coerced consumers at the expense of others. If, however, consumers are not fully rational and/or informed, counterfactual utility becomes endogenous to current policy, and the welfare loss associated with limiting coercion increases. We set up a numerical version of our model and find that the error-related welfare loss can be substantial.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 5044

Classification and Topics

• Classification: Wirtschaft ; Microeconomic Policy: Formulation, Implementation, and Evaluation ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Taxation and Subsidies: Incidence ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; Fiscal Policies and Behavior of Economic Agents: Household ; Public Goods
• Subject: coercion ; social planning ; public finance ; counterfactual utility

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hintermann, Beat ; Rutherford, Thomas F.
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/105118
• Last update: 10.03.2025, 11:45 AM CET