Friday, December 04, 2009
What is Fair
Oftern we are at crossroads to decide which of the following courses
should be applied :
1. If there is differntial performance, should the winner be encouraged with rewards and the loser be penalised for his performance
2. A second view is that the winner will anyway take care of themselves and given limited resources, it should be our endeavour to support the loser to help him better his performance.
Which of these two views is more tenable?
In my view, the answer lies in the context of the relationship and the resources available to persue two competing actions (reward winner vs encourage loser). For example, in a business organisation, where resources are limited, the winner gets a bigger piece of the pie and the loser typically is given the go-by.
However, if it is a household when there are two children, who are diffrerent in capabilities (say'winner'and 'loser'), parents will typically encourage the one with lower capability to do better. They will appeal to one with the higher capability to guide the other child and given limited resources will do more for the less capable child.
The question becomes more tricky when say a federal govt is dealing with state governments. A fair distribution plan would entail that the bigger contributor to the kitty get a larger share. However the federal govt. would like to encourage lagging states to do better and hence apportion a larger pool of contributed resources back to the poor-performing states.
This is in effect a subsidy - the better-performing states subsidizing the poor-performing states.
Here, i believe the laffer curve-principle will apply. There is an equilibrium point beyond which there will be diminishing returns. The subsidy should not be large enough for the better-performing states to disincetivise them to do well. However without some kind of 'extra' subsidy there may not be resources to help the poor performing ones.
Balance again seems to be the key to doing this.
should be applied :
1. If there is differntial performance, should the winner be encouraged with rewards and the loser be penalised for his performance
2. A second view is that the winner will anyway take care of themselves and given limited resources, it should be our endeavour to support the loser to help him better his performance.
Which of these two views is more tenable?
In my view, the answer lies in the context of the relationship and the resources available to persue two competing actions (reward winner vs encourage loser). For example, in a business organisation, where resources are limited, the winner gets a bigger piece of the pie and the loser typically is given the go-by.
However, if it is a household when there are two children, who are diffrerent in capabilities (say'winner'and 'loser'), parents will typically encourage the one with lower capability to do better. They will appeal to one with the higher capability to guide the other child and given limited resources will do more for the less capable child.
The question becomes more tricky when say a federal govt is dealing with state governments. A fair distribution plan would entail that the bigger contributor to the kitty get a larger share. However the federal govt. would like to encourage lagging states to do better and hence apportion a larger pool of contributed resources back to the poor-performing states.
This is in effect a subsidy - the better-performing states subsidizing the poor-performing states.
Here, i believe the laffer curve-principle will apply. There is an equilibrium point beyond which there will be diminishing returns. The subsidy should not be large enough for the better-performing states to disincetivise them to do well. However without some kind of 'extra' subsidy there may not be resources to help the poor performing ones.
Balance again seems to be the key to doing this.
