lecture 19 - LECTURE 19: SOCIAL EVALUATION OF MARKET...

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2010: LECTURE 19 1 LECTURE 19: SOCIAL EVALUATION OF MARKET OUTCOME: Efficiency v. Equity Tradeoff APPLICATION OF MARKET EFFICIENCY: TRADE Now: Trade gains as exporter. Next class: Trade gains as importer. Mankiw: Chapter 7 and 9
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2010: LECTURE 19 2 EFFICIENCY v. EQUITY TRADEOFF Good news: market creates as much well-being as possible Bad news: market does not distribute well-being equally. US has a lot of very poor people: 2007 poverty line for family of four: 20 000 ($/ year) 1 in 10 persons below poverty line 1 in 5 children in families below poverty line
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2010: LECTURE 19 3
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2010: LECTURE 19 4
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2010: LECTURE 19 5
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2010: LECTURE 19 6 Value-judgement : Market outcome is “good” because it creates as much well- being as is possible. Criticism : what matters is not only amount of well-being created, but also how the well-being is distributed: equity .
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7 Market outcome Represent well-being created by economy as pie baked in oven: Total well-being created is size of pie: 2000 ($/yr) “The market oven bakes the biggest pie”. But “slices” are unequal.
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lecture 19 - LECTURE 19: SOCIAL EVALUATION OF MARKET...

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