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9 - BCOR3010 Class#9 Okun Equality vs Efficiency Market...

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Unformatted text preview: BCOR3010 Class #9: Okun: Equality vs Efficiency Market Failures Critiques of the Free Market BiLateral and Voluntary Full Information Definition of Fairness Market Failures Today Complete Okun (vs Friedman) The Role of Fairness ReDistribution of Income Market Failures The Case for Gov't Involvement in the Free Market 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 Egalitarian ideals in politics/society Inequality in economic system Economic Justice Arthur Okun Universal Entitlements Free Universal Nontransferable Equality vs. Efficiency Liberty Pluralism Humanism 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% Income (Family) Net Worth (Family) 7.2% 0.2% Top 20% 57.3% (~8x's) ~80% (~400 x's) DW Haslett, Inheritance Justified, Philosophy & Public Affairs, 1986 Equality vs. Efficiency Where do we draw the lines? Enhancing equality 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 Information Public Goods Addressing Market Failures Government intervention interest groups, addressed by businesses themselves who consider the social interest Gov't Provision of Public Goods National Defense Public Services Education National/ State Parks Health Care? Market Stability? Gov't Role: Information Regulatory: FDA, SEC, Truth in Advertising NYC Calorie Posting Initiative FDA in Merck, Gov't Role in McDonalds, Tobacco ...
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