Diagrammatic Representation of Equity Principles

Ram Sewak Dubey June 6, 2011

The purpose of this note is to explain the equity notions commonly studied in the social choice literature through a diagram. Broadly speaking the equity principles are categorized in two groups, procedural and consequentialist. Suppes-Sen equity which is also known as Anonymity or (nite) Permutation Invariance is an example of procedural equity. Hammond Equity, Pigou-Dalton Equity, Strong Equity and Hammond Equity for the Future are examples of the consequentialist equity. The note is organized as follows. In Section 1, we dene the equity principles. In Section 2, we explain these denitions with the help of a diagram.

1 Denitions
Let R be the set of real numbers and N the set of positive integers. Suppose Y R is the set of all possible utilities that any generation can achieve. Then X = Y N is the set of all possible utility streams. If xn X, then xn = (x1 , x2 , ), where, for all n N, xn Y represents the amount of utility that the generation of period n earns. For all y, z X, we write y z if yn zn , for all n N; we write y > z if y z and y = z; and we write y >> z if yn > zn for all n N. Denition. Hammond Equity (HE): If x, y X, and there exist i, j N, such that y j > x j > xi > yi while yk = xk for all k N \ {i, j}, then x y. Denition. Strong Equity (SE): If x, y X, and there exist i, j N, such that y j > x j > xi > yi while yk = xk for all k N \ {i, j}, then x y. Denition. Pigou-Dalton Equity (PDE): For all x, y X, if there exists i, j N such that (i) yi < xi x j < y j and xi yi = y j x j ; and (ii) xk = yk for all k N \ {i, j}, then x y. Denition. Suppes Sen Equity or Anonymity Axiom (AN): For all x, y X, if there exist i, j N such that xi = y j and x j = yi , and for every k N \ {i, j}, xk = yk , then x y.
thank Tapan Mitra for helpful conversations. of Economics, Uris Hall, Email : rsd28@cornell.edu
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Denition. Hammond Equity for the Future (HEF): If x, y X, are such that x {a, d, d, } and y {b, c, c, } and d < c < b < a, then x y1 .

2 Explanatory Figure
We combine all the equity notions in one diagram. Observe that in the denitions of HE, SEA, PD and AN, only a pair of elements of sequences x and y are different. Therefore it is possible to depict the ranking of such sequences by showing the relationship between the corresponding pair of elements of two sequences. This is useful as we can show the operation of these equity principles in two dimensional diagram. Also observe that in HEF, the sequences which are comparable contain only two distinct elements each. Therefore, it is possible to show HEF ranking also in a two dimensional diagram.

2.1 Hammond Equity

Consider allocation A (a, d) which is below the 45 line. Set of allocations weakly preferred to A are all the points contained in the interior of the ADE. Take any point, say P (b, c), in the interior of the ADE. Then a > b > c > d implies (b, c) (a, d). Set of allocations weakly worse than A are all the points contained in the interior of the blue rectangle. Take any point, say P (b, c), in the interior of the rectangle. Then b > a > d > c implies (b, c) (a, d). Similarly consider allocation B which is above the 45 line. Set of allocations weakly preferred to B are all the points contained in the interior of the BDE. Set of allocations weakly worse than B are all the points contained in the interior of the red rectangle.

2.2 Strong Equity

Set of allocations strictly preferred to A are all the points contained in the interior of the ADE. Take any point, say P (b, c), in the interior of the ADE. Then a > b > c > d implies (b, c) (a, d). Set of allocations strictly worse than A are all the points contained in the interior of the blue rectangle. Take any point, say P (b, c), in the interior of the rectangle. Then b > a > d > c implies (b, c) (a, d). Set of allocations strictly preferred to B are all the points contained in the interior of the BDE. Set of allocations strictly worse than B are all the points contained in the interior of the red rectangle.
equity notion was introduced in a paper by Asheim and Tungodden (2004).Reference for the other equity notions are Hammond (1976) (for Hammond Equity), dAspremont and Gevers (1977) (for Strong Equity), Asheim et al. (2007) (we have followed this paper for the denitions in this note).
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2.3 Pigou-Dalton Equity

Set of allocations strictly preferred to A are all the points on the diagonal AC excluding A itself. Take any point, say P (b, c), on the line segment AC. Observe that the sum of the two coordinates is same on the entire line segment GF,(since slope of this line is 45 ). So, b + c = a + d or a b = c d. Then a > b > c > d implies (b, c) (a, d). Set of allocations strictly worse than A are all the points on the diagonal AF excluding A itself. Take any point, say P (b, c), on the line segment AF. Then b > a > d > c implies (b, c) (a, d). Set of allocations strictly preferred to B are all the points on the diagonal BC which does not include B itself. Set of allocations strictly worse than B are all the points on the diagonal BG which does not include B itself.

2.4 Suppes-Sen Equity or Anonymity Axiom

Consider allocation A which is below the 45 line. Point B (the mirror image of point A with respect to the 45 line) is the sole point which is comparable to A and both points are indifferent to each other.

2.5 Hammond Equity for Future

Let s = 1 and t = 2, then the only points which are comparable are those lying below the 45 line. Point A refers to an allocation {a, d, d, }, with xs being consumption in period 1 and xt being the consumption in each of the remaining periods. Consider allocation A which is below the 45 line. Set of allocations strictly preferred to A are all the points contained in the interior of the triangle ADE. Take any point, say P (b, c), in the interior of the ADE. Then a > b > c > d implies (b, c) (a, d). Set of allocations strictly worse than A are all the points contained in the interior of the blue rectangle. Take any point, say P (b, c), in the interior of the rectangle. Then b > a > d > c implies (b, c) (a, d). Notice the HEF lacks symmetry, in the sense that points above 45 line are not comparable by HEF.

References
G. B. Asheim and B. Tungodden. Resolving distributional conicts between generations. Economic Theory, 24(1):221230, 2004. G.B. Asheim, T. Mitra, and B. Tungodden. A new equity condition for innite utility streams and the possibility of being paretian. In J. Roemer and K. Suzumura, editors, Intergenerational Equity and Sustainability, volume 143, pages 5568. (Palgrave) Macmillan, 2007. C. dAspremont and L. Gevers. Equity and informational basis of collective choice. Review of Economic Studies, 44(2):199209, 1977. P. J. Hammond. Equity, Arrows Conditions, and Rawls Difference Principle. Econometrica, 44(4):793804, 1976.

xt
B 45 C 45 A E

45 O

xs
SE(HE): A ( ) ADE; A ( ) Blue Rectangle SE(HE): B ( ) BDE; B ( ) Red Rectangle PDE: A AC; B BC; A AF; B BG HEF: A ADE AN: A B

Figure 1 : Commonly used equity notions in Social Choice Literature 4