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Utility

a measure of happiness or satisfaction.

Permanent income

a person's normal income.

Negative income tax

a tax system that collects revenue from high-income households and gives subsidies to low-income households.

Poverty line

an absolute level of income set by the federal government for each family size below which a family is deemed to be in poverty.

Quintile

any of five equal groups into which a population can be divided according to the distribution of values of a particular variable.

Social insurance

government policy aimed at protecting people against the risk of adverse events.

Welfare

government programs that supplement the incomes of the needy.

Income inequality

is an extreme disparity of income distributions with a high concentration of income usually in the hands of a small percentage of a population.

Poverty rate

measures the percentage of the population whose family income falls below an absolute level called the poverty line.

Maximin criterion

the claim that the government should aim to maximize the well-being of the worst-off person in society.

Liberalism

the political philosophy according to which the government should choose policies deemed just, as evaluated by an impartial observer behind a "veil of ignorance."

Utilitarianism

the political philosophy according to which the government should choose policies to maximize the total utility of everyone in society.

Libertarianism

the political philosophy according to which the government should punish crimes and enforce voluntary agreements but not redistribute income.

Life cycle

the regular pattern of income variation over a person's life.

In-kind transfer

transfers to the poor given in the form of goods and services rather than cash.