Equal Payment Research Articles

Using the Veil of Ignorance to Ensure Distributive Justice in Class Actions: A Rawlsian Approach to 'Adequacy of Representation' after Stephenson

This Article's normative claim - that a rule allowing subsequent challenges to class action settlements is compelled by our basic intuitions of fairness and justice when class members could not conceivably have agreed to the arrangement had they been present but not known their precise in the class - builds on the Rawlsian construct of fairness as the product of (hypothetical) decision-making in an behind a of ignorance, and the economics of human decision-making under conditions of uncertainty. This approach suggests that certain types of settlements in both high-individual-stakes/toxic torts/personal injury class actions and small-individual-stakes/consumer fraud class actions should be subject to subsequent challenge. First, this combined Rawlsian/economics analysis strongly suggests that all class settlements that provide for the possibility that any class members will receive negative relief, as in the Bank Boston litigation, are unfair and should be subject to challenge on adequacy of representation grounds. Second, with regard to high-individual-stakes class actions, the approach also suggests that settlements that create the possibility that some class members will receive no relief always should be subject to subsequent challenges. Third, again in high-individual-stakes class actions, subsequent challenges should be permitted with respect to settlements that provided all class members some relief, but that grossly deviated from a principle of equal payment for equal harms without investing administrative cost savings in the improvement of the of the most severely-injured such that the most-severely injured receive more than they would have under an equal- compensation-for-equal-injuries formula. Fourth, even in small individual stakes litigation, subsequent challenges should be permitted to settlements that provided for the possibility of providing zero compensation to any class members or that deviated from an equal-compensation-for-equal-injuries approach compensating without thereby reaping significant administrative cost savings that are dedicated to increasing the overall compensation pool for class members. The essence of the Rawlsian approach is a thought experiment regarding the ordering of society as a whole. In the thought experiment, Rawls postulates the presence of human beings under certain conditions - position conditions - and then reflects on what arrangements or rules those individuals would agree to as fair for the distribution of goods and entitlements in the society as a whole. The conditions Rawls sets for his thought experiment - individual decision-making, ignorance on the part of each individual as to their morally irrelevant or contingent characteristics beyond the veil, very high stakes for individual welfare and life prospects for the decision-makers, a generally shared moral sense of the fundamental equality of human beings - readily translate from original (persons deciding on the rules for social ordering as a whole) to the toxic tort/products liability class action original position, in which class members must choose a distribution regime for compensation for possible current and future cases of disabling or even fatal diseases, conditions, or injuries. Thus, if persons in Rawls' original adhere to a maximin principle of avoiding worst possible outcomes, and that adherence deserves normative weight, we should expect that class members in toxic tort/products liability cases behind a veil of ignorance will adhere to a maximin approach, and we should accord normative weight to that adherence. The Article does not rely solely on the extension of the Rawlsian original thought experiment to the class action context, however. One of the predictions of neoclassical economic theory, as well as a basic finding of behavioral/experimental/empirical economics is risk aversion in human decision-making in the absence of an ability to self- or third-party-insure against bad outcomes. Other findings are an aversion to unequal distributions of wealth and other goods absent some objective justification for inequality, and an aversion to prospective losses (as opposed to gains or foregone gains). These well-established findings, in and of themselves, suggest that settlements of the sort at issue in Stephenson and Homeside could not have garnered the agreement of class members had they been able to give or deny their consent. In addition, surveys I conducted of first-year law students demonstrate a strong hostility to settlements that entail the risk that a class member might be left without any relief for severe injuries, and a strong predisposition toward settlements that ensure equal outcomes for equally harmed class members.

Budgetary shocks and revenue adjustment: How governments respond to unexpected fiscal shocks

This paper uses panel data from seven Canadian provinces which received Equalization payments over the period 1980/81 to 1995/96 to examine how provinces adjust own-source revenue in response to past budget shocks. Governments respond symmetrically to past own-source revenue shocks: they increase or reduce own-revenue by $0.75 for every unexpected dollar shock in own-source revenue last year. In contrast, revenue responses to past grant shocks are asymmetric. Provinces lower own-source revenue by $0.87 in response to an unexpected extra dollar from Equalization last year. But, they make no adjustment following an unexpected Equalization shortfall. The magnitude of these responses suggest that provinces see a significant component of these shocks to be persistent. Lastly, the results with respect to past spending shocks are mixed. In contrast to recent empirical results on asymmetric responses to changes in grants, the results in this paper suggest that, at least in the short run, unexpected increases in Equalization are unlikely to have a large, stimulative effect on government spending.

Determinants of health care utilization by German sickness fund members--with application to risk adjustment.

In many countries, social health insurance systems are being reformed in favor of more competition among insurers, while premiums are community rated by regulation. The implicit incentives for insurers to engage in risk selection can only be curtailed using appropriate systems of risk-adjusted equalization payments among insurers. To develop these systems, predictors of individual utilization patterns have to be identified, e.g. via regression analysis using previous utilization data. In some countries such as Germany, such data are hardly ever available. In the early nineties, a number of sickness funds participated in an experiment in which individual utilization data were collected. Our data set covers more than 70,000 members of company sickness funds over a 5-year period. We analyze socio-demographic determinants of utilization which could be used as risk adjusters in a risk equalization scheme. Our results suggest that besides age and sex, the set of risk adjusters should include income, family status and a dummy for the last year of life.

Government Policy, Prejudice, and the Experience of Black Civil War Soldiers and Their Families

During the American Civil War, the federal and state governments greatly expanded the financial assistance available to soldiers and their families. While a pension system was instituted after the war to provide a safety net for the aging veterans and their families, African Americans did not receive equal benefits, nor did local communities equally support the black families. The wartime experience of African Americans varied enormously depending on the region in which they lived. Even after the federal government had been persuaded to pass color-blind legislation, the black veterans and their families consistently faced difficulties in getting equal payment. The factors behind the inequitable treatment were a complex mix of widespread prejudice, structural problems, and the difficulties of poor and illiterate groups' receiving government consideration.

GP income in relation to workload in deprived urban areas in The Netherlands. Before and after the 1996 pay review.

General practitioner workload is higher in deprived urban areas and for the elderly. This led to the introduction of additional GP payments regarding these patients, in the UK and in the Netherlands. This study examines whether this has resulted in more equal payment for work done in the Netherlands. GP workload and income have been assessed on the basis of a survey among 1154 GPs (response: 62%). Suggest that total GP income is still lower in deprived areas, but per hour and per patient contact the additional payments gave equity. It is thus concluded that Dutch deprivation payments effectively compensate GPs in deprived areas for their higher workload.

Understanding Canada: Through the Prism of Contemporary Economic Thought

The Uneasy Case for Equalization Payments. Dan Usher. Vancouver: The Fraser Institute, 1995. Unnecessary Debts. Lars Osberg and Pierre Fortin (eds.). Toronto: Lorimer, 1996. Banking on Deception: The Discourse of Fiscal Crisis. Thom Workman. Toronto: Fernwood Publishing, 1996. Understanding Canada, Building on the New Canadian Political Economy. Wallace Clement (ed.). Montreal: McGill-Queen's University Press, 1997. Profits and Politics: Beaverbrook and the Gilded Age of Canadian Finance. Greg P. Marchildon. Toronto: University of Toronto Press, 1996. The Implications of Knowledge-based Growth for Micro-economic Policies. Peter Howitt. Calgary: University of Calgary Press, 1996. Attention to the problems which social science addresses tells us a great deal about the nature of the Canadian economy and the national identity, about not only material realities but also Canadian values. Values are ever present in the lexicon of economics. They penetrate economics at a level of vocabulary, perceptional selectivity, definition of the problem, choice of subject matter, rationalization and normative certitude. Values serve as a filtration system governing the formulation and evolution of ideas. They can take the form of some notion of human nature, a partial theory knowledge or a specific conception of reality. Whatever form they take, values determine how scholars order the world around them. Of course - as the books under review demonstrate - at any one time a plurality of values exists and these values compete in the formulation of theory, the direction of public policy and our understanding of the immediate and distant past. The six works under review are diverse in both method and scope. Diversity is part of the Canadian condition. Indeed - as Robin Neill has demonstrated in his classic study - the history of Canadian economic thought is one of contradiction, paradox and heterogeneity.1 The fact that the Canadian nation is made up of five distinct regions, each displaying its own pace and pattern of economic growth, has contributed to the assortment of competing economic discourses and paradigms. Yet such variance need not be problematic. On the contrary, states the intellectual historian A.B. McKillop, our national identity is based on the existence of diversity.2 Despite their differences, the books under review are similar in the matters to which they attend. Two books analyze the nature of the debt and debt discourse (albeit in very different ways). Two others - utilizing dissimilar methodologies attempt to account for the role of innovation and invention in economic growth. A fifth questions the value of the quintessentially Canadian programme of equalization payments while the sixth seeks to understand the economic and political forces involved in the recent neo-conservative transformation of Canadian society. In the first section of this review, the choice of subject matter, the arguments of the authors, as well as the political-valuational judgments that colour their reasoning, will be identified and compared. In the second and third sections, a closer examination of some of their metaphysical preconceptions will be undertaken, specifically of the authors' perceptions of human nature and conceptions of reality. The last section is dedicated to an analysis of methodology and the role of the historical method in economics. The Matters to Which We Attend Each way of ordering - or interpreting - postmodern life starts with an implicit or explicit decision about priority. When dealing with economic phenomena the tendency in the discourse of social science has generally been to pick one main topic of interest and regard the rest as secondary, indeed, epiphenomenal. To do so is to manifest one's perception of what things are good, important, and desirable in the world. Three of the books under review deal with public finance. …

From socialist principles to motorcycle maintenance: the origin and development of the salaried physician model in the Israeli Public Health Services, 1918 to 1998.

For more than 70 years, physicians in the Israeli health care system have been employed on a fixed salary rather than on a fee-for-service basis. The present report is a brief review of the origin and development of this unique salaried physician model and its effect on the terms of physicians' employment. Archival documents were reviewed. The salaried physician model was introduced to ensure egalitarian health care for patients rather than equal payment for physicians. It was accepted by physicians because it guaranteed their employment and income. However, over the years, the salaried physician model has evolved into a complex wage scale, with multiple fringe benefits that bypass formal agreements in order to reward individual physicians. In addition, the salaried physician model has encouraged illegal private practice, which is viewed today as one of the major problems of the Israeli Public Health Services.

THE COST OF INCOME REDISTRIBUTION IN AUSTRALIA

This paper analyses the effect of raising effective marginal tax rates on the income of the representative household in each gross income decile in Australia by one percentage point, and distributing the proceeds of the tax increase either in the form of an equal grant, or as an equal payment to members of households in the lower half of the income distribution. The effectiveness of the program in redistributing income is measured as the ratio of total gains in disposable income to households in target deciles to losses in non‐target groups, or as the proportional reduction in the poverty gap. The cost is measured as the ratio of the sum of the income‐equivalent of changes in the welfare of non‐target groups to those of target groups, or as the ratio of income‐equivalent losses to gains.

Internal Migration, Center-State Grants, and Economic Growth in the States of India: A Reply to Rao and Sen

IN THEIR COMMENTS on our recent paper (Cashin and Sahay, 1996), Rao and Sen have concerns about several issues: our test of convergence; the sample of states included in our analysis; our measure of state disposable income; and our measure of center-state equalization payments. We respond below to each of these issues in turn. First, Rao and Sen are incorrect in asserting that the neoclassical growth model predicts absolute convergence as it, in fact, predicts conditional convergence. What drives the speed of convergence is the level of initial income for each economy relative to its own steady state level of income and steady state income growth rate. Absolute and conditional convergence are likely to be similar for regions of a given country (such as the states of India) that are reasonably homogeneous with respect to their steady state income levels and growth rates (that is, for regions that share similar preferences and technology). As to our examination of cross-state convergence, Rao and Sen seem to be unaware that the use of multiple sectoral variables to control for differential sectoral shocks (which may temporarily affect the growth performance of a state in a manner that is correlated with initial income) is common in the empirical growth literature (Barro and Sala-i-Martin, 1991, 1992, and 1995; and Sala-i-Martin, 1996a and 1996b). Notwithstanding this, Rao and Sen's comment that the share of manufacturing output may be regarded in the Indian context as a policy variable is an interesting one. If true, they are correct in asserting that this "may indicate conditional con-

The relationship between payment for childbirth care and prevalence of cesarean sections in maternity hospitals in Rio de Janeiro: a review of Carlos Gentile de Mello's hypothesis

The purpose of this study was to compare prevalence of cesarean sections in nine private maternity hospitals in the city of Rio de Janeiro in 1968 and 1993, seeking to correlate the form of payment with prevalence of cesareans. We analyzed 3,413 deliveries in 1968 in nine maternity hospitals, at a time when a form of payment called "per service unit" was used. Twenty-five years later, these same maternity hospitals were reanalyzed, with a total of 11,065 births. These data were from Gentile de Mello (1968) and the Report from the Information System on Live Births, by the Rio de janeiro Municipal Health Secretariat. We performed a statistical analysis on the proportion of cesareans comparing the two years and observed a statistically significant increase in their prevalence in 1993 as compared to 1968, although payment was nearly equal for childbirth care in the two years. The elimination of the "per service unit" payment system and the implementation of equal payment for transvaginal and cesarean deliveries proved insufficient to decrease the prevalence of cesareans. We suggest that form of payment alone does not determine the high prevalence of cesarean sections, and that other variables are impacting this phenomenon.

The Uneasy Case for Equalization Payments

The Uneasy Case for Equalization Payments

Reviews

Book reviewed in this article: Macroeconomics, by Ian M. McDonald Economic Dynamics, by Giancarlo Gandolfo Scientific Word Version 2.5, by TCI Software Research Surveys In Econometrics, edited by L. Oxley, D.A.R. George, C.J. Roberts, and S. Sayer The World Economy in Transition: What Leading Economists Think, edited by R. Hinshaw The Uneasy Case for Equalisation Payments, by Dan Usher The Economics of Gender, by Joyce Jacobsen Estimating Economic Values for Nature, by V. Kerry Smith The Tobin Tax: Coping with Financial Volatility, edited by Mahbub ul Haq, Inge Kaul, and Isabelle Grunberg Poverty, Inequality and Social Welfare in Australia, by David Thomas Johnson

The Uneasy Case for Equalization Payments. By DAN USHER.

<i>The Uneasy Case for Equalization Payments</i>. By DAN USHER.

The Implications of Knowledge-Based Growth for Micro-Economic Policies

The Implications of Knowledge-based Growth for Micro-economic Policies. Peter Howitt. Calgary: University of Calgary Press, 1996.Attention to the problems which social science addresses tells us a great deal about the nature of the Canadian economy and the national identity, about not only material realities but also Canadian values.Values are ever present in the lexicon of economics. They penetrate economics at a level of vocabulary, perceptional selectivity, definition of the problem, choice of subject matter, rationalization and normative certitude. Values serve as a filtration system governing the formulation and evolution of ideas. They can take the form of some notion of human nature, a partial theory knowledge or a specific conception of reality. Whatever form they take, values determine how scholars order the world around them. Of course -- as the books under review demonstrate -- at any one time a plurality of values exists and these values compete in the formulation of theory, the direction of public policy and our understanding of the immediate and distant past.The six works under review are diverse in both method and scope. Diversity is part of the Canadian condition. Indeed -- as Robin Neill has demonstrated in his classic study -- the history of Canadian economic thought is one of contradiction, paradox and heterogeneity.(f.1) The fact that the Canadian nation is made up of five distinct regions, each displaying its own pace and pattern of economic growth, has contributed to the assortment of competing economic discourses and paradigms. Yet such variance need not be problematic. On the contrary, states the intellectual historian A.B. McKillop, our national identity is based on the existence of diversity.(f.2)Despite their differences, the books under review are similar in the matters to which they attend. Two books analyze the nature of the debt and debt discourse (albeit in very different ways). Two others -- utilizing dissimilar methodologies -- attempt to account for the role of innovation and invention in economic growth. A fifth questions the value of the quintessentially Canadian programme of equalization payments while the sixth seeks to understand the economic and political forces involved in the recent neo-conservative transformation of Canadian society.In the first section of this review, the choice of subject matter, the arguments of the authors, as well as the political-valuational judgments that colour their reasoning, will be identified and compared. In the second and third sections, a closer examination of some of their metaphysical preconceptions will be undertaken, specifically of the authors' perceptions of human nature and conceptions of reality. The last section is dedicated to an analysis of methodology and the role of the historical method in economics.The Matters to Which We AttendEach way of ordering -- or interpreting -- postmodern life starts with an implicit or explicit decision about priority. When dealing with economic phenomena the tendency in the discourse of social science has generally been to pick one main topic of interest and regard the rest as secondary, indeed, epiphenomenal. To do so is to manifest one's perception of what things are good, important, and desirable in the world.Three of the books under review deal with public finance. In The Uneasy Case for Equalization Payments, Dan Usher calls into question the belief that equalization payments from Ottawa to the provinces redistribute income, increase GNP and further equality. He uses arithmetical examples to illustrate the potential inequalities (Part II), inefficiencies (Part III) and inequities (Part IV) in the existing system. Having made his case, Usher concludes that the subsidization of have-not provinces is not necessarily beneficial to the poor nor is it necessarily favourable to general prosperity. Indeed, it is just as likely, Usher maintains, that intergovernmental transfers have simply shifted income from one group of affluent people to another, with little -- and only incidental -- benefit to the poor. …

HOW MANY PAYCHECKS? AN EXAMPLE OF A SELF‐IMPOSED CONSTRAINT

Many faculty members prefer to receive their salary in twenty‐four equal payments over the entire year as opposed to receiving the salary sooner, in eighteen equal payments over the academic year. I consider two explanations for this choice: (1) it is chosen to eliminate transactions costs associated with administering a similar plan oneself, or (2) it is chosen as a self‐imposed constraint to insure against one's own potential imprudent behavior. The paper provides a test which clearly supports the second alternative.

Some New Equations and Constraints Useful in Analysis of Serial Repayment or Investment

Abstract Initial value of the sum of a series of equal payments of R dollars at equal time intervals is V and terminal value is W. It is desired to find total number (N) of such payments and rate of effective periodic compound interest (P) implied by R, V, W under a specified protocol relating start and end of a contract (e.g., a debt repayment, annuity, or lease) to times of first and last payments. Two new equations are derived, completing the set of five needed to solve for any unknown, given any three of the remaining variables and an appropriate protocol. A list of implied constraints has been provided to facilitate early detection of invalid values assigned to trios of "known" variables and to help ensure that required guesses at value of unknowns do not violate implied limits. Erroneous and correct relationships between periodic rate (P) and annual percentage rate (APR) are compared. North. J. Appl. For. 11(2):58-62.

GENERALIZED FORMULA FOR THE PERIODIC GEOMETRIC-GRADIENT SERIES PAYMENT IN A SKIP PAYMENT LOAN WITH ARBITRARY SKIPS

ABSTRACT Recently, Formato derived a useful formula of the amount of periodic equal payment in a skip payment loan with arbitrary skips using a second-order finite difference equation. We rederive his formula using simple arithmetics and provide an intuitive explanation of the formula. We also extend his result to the case that periodic payments occur in a geometric-gradient-series.

The Offshore Accords and Hibernia's Impact on the Newfoundland Treasury

The provincial governments of Newfoundland and Nova Scotia have each signed an accord with the Government of Canada to manage and share revenues from the development of their respective offhsore oil and gas fields. Negotiated provisions for offsetting equalization payments were an important component of each of these accords. This paper analyzes how effective these offset provisions might be in sheltering offshore oil revenue derived from the Hibernia project under various oil price scenarios. Both mathematical and simulation analyses demonstrate that the provisions negotiated by Nova Scotia shelter significantly more revenue than those of Newfoundland.

An Investigation of the Rule-of-Thumb Method of Estimating After-Tax Rates of Return

Abstract The effect of income taxes may significantly alter an investment's expected profitability relative to competing alternatives. With one exception, both post-tax cash flows and a post-tax discount rate must be used if the effects of taxation are to be correctly incorporated into an investment analysis. The adjustment of the pre-tax discount rate to a post-tax rate often is accomplished by using an estimate derived by rule-of-thumb. This estimate (effectively reducing the pre-tax rate by the product of itself and 1 minus the marginal income tax rate) is accurate only when the alternative used to determine the opportunity cost of capital involves a nondepreciating asset, returning equal annual payments, whose salvage value is exactly 100% of first cost, or where the alternative investment's life is equal to 1 year. For alternatives with depreciable, depletable, or tax-deferred assets, the rule-of-thumb estimate is not accurate. Its accuracy depends on the alternative's real rate of return, the investor's marginal income tax rate, the level of inflation, and the investment period. In general, the rule-of-thumb method's accuracy decreases as the real rate of return decreases and as the income tax rate, inflation, and investment period increase. In addition, its accuracy is further decreased as depreciation or depletion is accelerated, or if an investment tax credit is included as part of the expected income stream. For. Sci. 36(4):878-893.

Leadership and expenditures in rent-seeking models

The theory of rent-seeking begun by Tullock (1967), Krueger (1974) and Posner (1975) is now well-established. The analysis of these models typically involves studying properties of the symmetric noncooperative Nash equilibrium defined in terms of pure strategies (rent-seeking expenditures).' In a 1980 article, Tullock first noted and in 1984 later elaborated upon several situations where the traditional Nash equilibrium of equal rent-seeking payments by identical players failed to exist. This failure could arise for two reasons. First, even though the second order conditions were satisfied at the candidate symmetric equilibrium point,2 once at that point, all agents had a (conditional) incentive to choose zero rent-seeking to avoid negative payoffs. Thus the traditional point, while locally optimal (as indicated by the second order conditions), was not globally optimal. The second possible reason for failure was that, at the traditional point, the second order conditions were violated. The problems arise because r, a parameter affecting the (conditional) probability of successful rent-seeking, may be "too large". The principal consequence is that the traditional model with myopic agents does not capture some of the potential behaviour of the players. A particularly worrisome feature is that agents may find it privately optimal to spend (in total) more on rentseeking than the value of the prize. As well, benefits sometimes accrue to agents if they can block entry by preemptive play. Tullock (1984: 97) has conjectured that "there is another game in the precommitment stage, in which the parties attempt to make the first commitment so that no one else will enter". In this paper we consider a two-player noncooperative rent-seeking game where agents are allowed to adopt and potentially benefit from other than a passive stance towards their rivals. Firms must choose to be either leaders or followers and, consistent with that decision and their beliefs about their rivals' strategies, then choose their rent-seeking expenditures. Firms thus have the option of becoming Stakelberg leaders or Stakelberg followers.3 The analysis begins inSection 2. We provide three principal results that serve to characterize the range of possible equilibria. The results critically depend