econ120711 - Is it fair that some are rich because they are...

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Microeconomics December 7 th , 2011 Should we have government? Or can we rely on markets? The Big Question: Politics or Market - Markets can be efficient, fair, democratic, and promote empathy. - But markets cannot provide the security that people need, insurance against the hazards of life. Problems with relying on individual action through markets: Income distribution. Maximum social welfare only if market distribution of income is fair. Some are poor because they did badly in the genetic lottery. Or are just plain unlucky. Some are born poor. Others are born rich. Some people are born rich. Is this fair and efficient? Some are born with remarkable talents – should they also be rewarded with high incomes?
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Unformatted text preview: Is it fair that some are rich because they are born with talent? The market will allocate to individuals in a fair and efficient way only if the distribution of income is fair. Do they deserve $40 million/year? As much as 20,000 poor families? Should they have something to eat? Fair and Efficient Is it fair that Forest Edward Mars Jr. inherited $10 billion? Does it promote efficiency ? Does this type of distribution of income encourage productive work, and does it provide for the development of human capital? Some are rich because they establish monopolies through work or luck...
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