ZEF Discussion Papers on Development Policy No. 184
Under a deadweight loss of tax and transfer, there is tension between the optimal policy choices of a Rawlsian social planner and a utilitarian social planner. However, when with a weight greater than a certain critical value the individuals' utility functions incorporate distaste for low relative income, a utilitarian will select exactly the same income distribution as a Rawlsian.
Maximization of social welfare Rawlsian social welfare function Utilitarian social welfare function Deadweight loss Distaste for low relative income