Efficiency vs. Equity

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Revision as of 11:32, 31 May 2011 by (talk) (Pareto Efficiency)
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Economic Efficiency

Pareto Efficiency

Vilfredo Pareto

Allocation so that no one can be made better off


Microeconomic Definition of Maximization of Utility via Minimization of Cost

failure to account for equity

"what if"...society can derive utility from equity...(MBequity>MCequity => Efficiency = Equity)

conflict of incentives, because someone can be made better off, they have an incentive to not support equity

cost effects of attempting (Effect on PPF, inhibit econ growth...$ could be used on capital)

counterarg...$ used for equity has a higher effect on economic growth, spending chain, human capital