8 - BCOR3010 Class#8 Information and Choice Merck Vioxx...

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Unformatted text preview: BCOR3010 Class #8: Information and Choice: Merck Vioxx Case Efficiency and Equality Milton Friedman The Free Market – Voluntary Exchange – Information SuperSize Me Are the conditions necessary for free market functioning present in the case of McDonalds? That is, is the free market working here? What is the basis of the lawsuit against McDonalds? Should McDonalds have done away with supersizing. If so, why? Two BIG Tradeoffs Equality (Fairness) versus Efficiency Individualism versus Paternalism Okun Capitalism: represents equal and universal rights to earn unequal incomes “professing and pursuing egalitarian ideals in the political and social system but simultaneously generating and reinforcing gaping disparities in economic well-being. Arthur Okun Universal Entitlements – Free – Universal – Non-transferable Equality vs. Efficiency Rights – – – – – – – – Votes Equal Justice Before the Law Free Speech, Religion, Etc. Procreation Emigration Immunity From Enslavement To Have Public Services: Education, Fire Minimum Decent Standard of Living Arthur Okun Domain of market vs domain of rights Minimum Decent Standard of Living Equality vs. Efficiency Where do we draw the lines? Income Redistribution Tax Burden by AGI – – – – – – Top 1% Top 5% Top 10% Top 25% Top 50% Bottom 50% 36.89% 57.13% 68.19% 84.86% 96.70% 3.30% Note: AGI is Adjusted Gross Income Source: Internal Revenue Service U.S Income & Wealth Distribution Bottom 20% 7.2% 0.2% Top 20% 57.3% (~8x’s) ~80% (~400 x’s) Income (Family) Net Worth (Family) DW Haslett, Inheritance Justified, Philosophy & Public Affairs, 1986 Equality vs. Efficiency Where do we draw the lines? Enhancing equality Case #1 Merck Vioxx & Tobacco Critiques of the Free Market Bi-Lateral and Voluntary Full Information Definition of Fairness Market Failures Market Failures One perspective: When is it legitimate for government to intervene in private affairs? . . . Where the pursuit of private interest does not lead to an efficient use of society’s goods. Market Failures Monopoly Monopsony Externalities Public Goods Information ...
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