Efficiency vs. Equity
From Diversifying Economic Quality: A Wiki for Instructors and Departments
Contents
Economic Efficiency
Pareto Efficiency
Vilfredo Pareto
Allocation so that no one can be made better off
[[File:paretoefficiency.gif[frame]]
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
Social Welfare Functions
Cost-Benefit analysis--it's about trade offs
Utilitarianism
Rowlslian