Consider an accident in which an individual loses a leg. Assume that it lowers the individual's utility

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Consider an accident in which an individual loses a leg. Assume that it lowers the individual's utility at each level of income but increases his or her marginal utility (at each level of income), though only slightly. Show diagrammatically the utility functions before and after the accident. Show that if you were a utilitarian, you would give more income to the individual after the accident, but that even after the transfer, the individual who had the accident is worse off than before. Show the compensation that a Rawlsian would provide. Is it possible for a utilitarian to give more to the individual who had experienced the accident than a Rawlsian? Under what circumstances would a utilitarian give nothing to an individual who had experienced an accident?

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Economics Of The Public Sector

ISBN: 9780393925227

4th Edition

Authors: Joseph E. Stiglitz, Jay K. Rosengard

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