No. 971: The Hard Problem and the Tyranny of the Loser

Stan Cheung , School of Economics and Finance, Queen Mary University of London
Marco Mariotti , School of Economics and Finance, Queen Mary University of London
Roberto Veneziani , School of Economics and Finance, Queen Mary University of London

January 20, 2024

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Abstract

A Hard Problem is a collective choice problem in which the only feasible
alternatives apart from the status quo consist of a welfare gain to some people
(the Winners) and a welfare loss to the others (the Losers). These problems
are typical in a number of settings, such as climate action, anti-trust regulation,
and tax design. We study how to make collective choices when faced with Hard
Problems. We find that requiring a relatively weak fairness condition, which we
call Expansion Solidarity, necessarily leads to a dictatorship of the Losers, no
matter how small their number. Even one single Loser must be given the power
to veto any departure from the status quo, regardless of the number of Winners,
how large the gains, or how small the loss.

J.E.L classification codes: D63; D70.

Keywords:Pareto improvements, hard choices, solidarity, compromises, maximin difference.