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We conduct a social dilemma experiment in which real-world leaders can punish group members as a third party. Despite facing an identical environment, leaders are found to take remarkably different punishment approaches. The different leader types revealed experimentally explain the relative success of groups in managing their forest commons. Leaders who emphasize equality and efficiency see positive forest outcomes. Antisocial leaders, who punish indiscriminately, see relatively negative forest outcomes. Our results highlight the importance of leaders in collective action, and more generally the idiosyncratic but powerful roles that leaders may play, leading to substantial variation in group cooperation outcomes.

We investigate Schelling's hypothesis that payoff-irrelevant labels (\"cues\") can influence the outcomes of bargaining games with communication. In our experimental games, players negotiate over the division of a surplus by claiming valuable objects that have payoff-irrelevant spatial locations. Negotiation occurs in continuous time, constrained by a deadline. In some games, spatial cues are opposed to principles of equality or efficiency. We find a strong tendency for players to agree on efficient and minimally unequal payoff divisions, even if spatial cues suggest otherwise. But if there are two such divisions, cues are often used to select between them, inducing distributional effects.

We measure the social preferences of a sample of US medical students and compare their preferences with those of the general population sampled in the American Life Panel (ALP). We also compare the medical students with a subsample of highly educated, wealthy ALP subjects as well as elite law school students and undergraduate students. We further associate the heterogeneity in social preferences within medical students to the tier ranking of their medical schools and their expected specialty choice. Our experimental design allows us to rigorously distinguish altruism from preferences regarding equality–efficiency tradeoffs and accurately measure both at the individual level rather than pooling data or assuming homogeneity across subjects. This is particularly informative, because the subjects in our sample display widely heterogeneous social preferences in terms of both their altruism and equality–efficiency tradeoffs. We find that medical students are substantially less altruistic and more efficiency focused than the average American. Furthermore, medical students attending the top-ranked medical schools are less altruistic than those attending lower-ranked schools. We further show that the social preferences of those attending top-ranked medical schools are statistically indistinguishable from the preferences of a sample of elite law school students. The key limitation of this study is that our experimental measures of social preferences have not yet been externally validated against actual physician practice behaviors. Pending this future research, we probed the predictive validity of our experimental measures of social preferences by showing that the medical students choosing higher-paying medical specialties are less altruistic than those choosing lower-paying specialties.

Using PISA data for 16 Western OECD countries having comprehensive school systems, we explore the conditions under which the socioeconomic composition of schools affects educational efficiency and equality, to a greater or lesser extent. First, a multilevel analysis is applied to examine and compare the effect of school socioeconomic composition on students’ outcomes across countries and comprehensive models. Second, a simulation exercise shows the variations in the efficiency and equality levels that would result in two distinct hypothetical school scenarios in each country—a segregated scenario and a nonsegregated scenario. We find that a hypothetical reduction in school segregation would positively affect educational equality in all of the countries considered, but the impact on levels of educational efficiency in individual countries varies with the structure of comprehensive schooling.

Because minorities typically fare poorly on standardized tests, job testing is thought to pose an equality-efficiency trade-off: testing improves selection but reduces minority hiring. We develop a conceptual framework to assess when this trade-off is likely to apply and evaluate the evidence for such a trade-off using hiring and productivity data from a national retail firm whose 1,363 stores switched from informal to test-based worker screening over the course of one year. We document that testing yielded more productive hires at this firm-raising mean and median tenure by 10% or more. Consistent with prior research, minorities performed worse on the test. Yet, testing had no measurable impact on minority hiring, and productivity gains were uniformly large among minority and nonminority hires. These results suggest that job testing raised the precision of screening without introducing additional negative information about minority applicants, most plausibly because both the job test and the informal screen that preceded it were unbiased.

Context: For almost a decade, the Kidney Transplantation Committee of the United Network for Organ Sharing has been striving to revise its approach to allocating kidneys from deceased donors for transplantation. Two fundamental values, equality and efficiency, are central to distributing this scarce resource. The prevailing approach gives primacy to equality in the temporal form of first-come, first-served, whereas the motivation for a new approach is to redeem efficiency by increasing the length of survival of transplanted kidneys and their recipients. But decision making about a better way of allocating kidneys flounders because it is constrained by the amorphous notion of \"balancing\" values. Methods: This article develops a more fitting, productive approach to resolving the conflict between equality and efficiency by embedding the notion of compromise in the analysis of a tragic choice provided by Guido Calabresi and Philip Bobbitt. For Calabresi and Bobbitt, the goals of public policy with respect to tragic choices are to limit tragedy and to deal with the irreducible minimum of tragedy in the least offensive way. Satisfying the value of efficiency limits tragedy, and satisfying the value of equality deals with the irreducible minimum of tragedy in the least offensive way. But both values cannot be completely satisfied simultaneously. Compromise is occasioned when not all the several obligations that exist in a situation can be met and when neglecting some obligations entirely in order to fulfill others entirely is improper. Compromise is amalgamated with the notion of a tragic choice and then used to assess proposals for revising the allocation of kidneys considered by the Kidney Transplantation Committee. Findings: Compromise takes two forms in allocating kidneys: it occurs within particular approaches to allocating kidneys because neither equality nor efficiency can be fully satisfied, and it occurs over the course of sequential approaches to allocating kidneys that cycle between preferring equality and efficiency. Ross and colleagues' Equal Opportunity Supplemented by Fair Innings proposal for allocating kidneys best exemplifies the rationality of compromise as a way of achieving the goals of making a tragic choice. Conclusions: The attempt to design a policy for allocating kidneys from deceased donors for transplantation by balancing the values of equality and efficiency is misguided and unhelpful. Instead policymaking should both incorporate compromise into discrete approaches to allocating kidneys and extend compromise over sequential approaches to allocating kidneys.

This study uses a stochastic frontier approach to evaluate firm efficiency. The resulting efficiency score, based on firm characteristics, is the input for performance evaluation. The portfolio composed of highly efficient firms significantly underperforms the portfolio composed of inefficient firms even after adjustment for firm characteristics and risk factors, suggesting a required premium for the inefficient firms. The difference in performance between the two portfolios remains for at least five years after the portfolio formation year. In addition, firm efficiency exhibits significant explanatory power for average equity returns in cross-sectional analysis.

Arthur Okun famously argued that \"effciency is bought at the cost of inequalities in income and wealth\". Okun's trade-off represents the antithesis to Karl Polanyi's view of the relationship that the more embedded markets are in society, the better the social and economic outcomes they produce. This paper refines both these views. We argue that not all forms of market embeddedness are created equal, and that the relationship between equality and efficiency can be both positive and negative. We show this by examining how different ways of embedding economic activity in society through market regulation produce different combinations of efficiency and equality. We identify empirically three broad patterns: market liberal regulatory frameworks that promote competitive markets without decommodifying institutions; embedded liberal regulations that allow markets to work efficiently, but within the framework of decommodification and equality; and embedded illiberalism, where regulations hinder markets in favor of powerful social groups and where decommodification undermines both efficiency and equality. Okun's trade-off emerges as a special case limited to the English-speaking democracies: other OECD countries tend to exhibit either efficiency and equality together, or inefficiency and inequality together. These findings suggest a corrective to both nave market liberal views of the incompatibility of efficiency and equality, but also to the more sophisticated Varieties of Capitalism framework, which pays insufficient attention to the ways in which markets can be embedded in stable but apparently dysfunctional institutional arrangements.

There has recently been some literature on the properties of a Health-Related Social Welfare Function (HRSWF). The aim of this article is to contribute to the analysis of the different properties of a HRSWF, paying particular attention to the monotonicity principle. For monotonicity to be fulfilled, any increase in individual health—other things equal—should result in an increase in social welfare. We elicit public preferences concerning trade-offs between the total level of health (concern for efficiency) and its distribution (concern for equality), under different hypothetical scenarios through face-to-face interviews. Of key interests are: the distinction between non-monotonic preferences and Rawlsian preferences; symmetry of HRSWF; and the extent of inequality neutral preferences. The results indicate strong support for non-monotonic preferences, over Rawlsian preferences. Furthermore, the majority of those surveyed had preferences that were consistent with a symmetric and inequality averse HRSWF.

Distributive justice has been the focus of political theory with the postwar rise of the social welfare state, and Rawls' \"A Theory of Justice (1971)\" is arguably the most important work of political philosophy during that period. Parallel to this theoretical literature is a body of empirical research into distributive justice. We offer a synthesis of the theoretical and empirical approaches with an experimental study of how individuals use allocation principles in making judgments concerning income distribution under conditions of strict impartiality. Our experiment is designed in part to examine the extent to which they prioritize them consistent with Rawls' theory. We find that distributive justice judgments are complex but structured, with individuals tending to use several principles simultaneously and weighing them according to predictable factors, with sex and race being particularly important. We also find that individuals use several strategies in using competing allocation principles and that a considerable minority prioritize them consistent with a Rawlsian maximin strategy.