New publication in the American Economic Review!
We are proud to announce a new publication by Alexander Cappelen, Cornelius Cappelen, and Bertil Tungodden in the renowned American Economic Review. The paper contributes valuable insights to the field of economics by examining individuals' fairness preferences within second-best scenarios.
Title: Second-Best Fairness: The Trade-off between False Positives and False Negatives
The central finding of the study challenges conventional economic assumptions by revealing a prevailing inclination among individuals to prioritize reducing false negatives over false positives. This preference, which ensures deserving individuals receive their entitlement, even if it risks benefiting the undeserving, has far-reaching implications for policy design and implementation. The research also uncovers noteworthy disparities in second-best fairness preferences between the United States and Norway, highlighting the influence of cultural and political factors on perceptions of fairness.
We congratulate Alexander Cappelen and Bertil Tungodden from FAIR, and Cornelius Cappelen from the University of Bergen on this achievement.
A main focus in economics is how to design optimal policies in second-best situations, which often requires a trade-off between giving some individuals more than they deserve, false positives, and others less than they deserve, false negatives. This paper provides novel evidence on people's second-best fairness preferences from large-scale experimental studies in the United States and Norway. The majority of people are more concerned with false negatives than with false positives, but we document substantial heterogeneity in second-best fairness preferences between the countries and across the political spectrum. The findings shed light on the political economy of social insurance and redistribution.