Equality of Opportunity: How to encompass Fifty Shades of Luck

Arnaud Lefranc and Alain Trannoy

No 394, Working Papers from ECINEQ, Society for the Study of Economic Inequality

Abstract: Equality of opportunity is usually defined as a situation where the effect of circumstances on outcome is nullified (compensation principle) and the effort is acknowledged (reward principle). We propose a new version of the reward principle and we show that luck can be introduced in two ways in the definition of these principles, depending on whether the correlation between luck and circumstances should be nullified and whether the correlation between luck and effort should be rewarded. This leads to two distinct formulations (before-luck and after-luck) of the compensation and reward principles. Each combination of principles correspond to a particular view about how luck affects the opportunities of success. We also pay attention to the correlation between effort and circumstances which is dear to Roemer in a context of uncertainty.

Keywords: Equality of Opportunity; luck; compensation principle; reward principle; moral hazard; first-order stochastic dominance; correlation; effort. (search for similar items in EconPapers)
JEL-codes: C14 D63 J62 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2016-02
New Economics Papers: this item is included in nep-lab
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