Question

Economic experiments have found that individuals prefer an outcome where no one is made better off to an outcome where the welfare of only some is improved if that improvement in welfare is unequally distributed. Why do you think this is so?

Answer 1

ANS

This happens because of two factors, that are economical factors and phsychological factors which together contribute to the effect that individuals prefer an outcome where no one is made better off to an outcome where the welfare of only some is improved if that improvement in welfare is unequally distributed . The economical factors include the economic knowledge and reasons due to which the people form this preference, one of the economical reason is the increase in income gap or increase in income inequality due to this unequal distribution and which results in a certain section of economy being richer and a certain section of economy being poorer. This effects in reduction of facilitiies for the poorer and low eduction and increase in crime rates for the poor section. The other reason can be the problem of unfair selection of people for the welfare scheme, this means that all the people who are needy of the welfare scheme in the economy are not selected and due to which people's preference changes towards this type of selection of beneficiary in welfare scheme.

The psychological factor is that individuals have high interest in personal benefit when it is compared to the societal benefit. Everyone wants to have some personal advantage in the society and if only a specific section of the society is getting benefited due to a welfare scheme. Also individuals seem more interested in personal benefit is because they realize the needs that can be fullfilled with a welfare scheme and if only a certain section's needs is fulfillled then their status in the society would automatically fall down.