Lecture Notes 9

Lecture Notes 9 - Equity Equity is harder to define and...

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Equity Equity is harder to define and measure than efficiency, for which economists use Pareto efficiency as a lead standard. A subjective concept Process-oriented notions of equity focus on the procedures used to arrive at an allocation of resources Is the free market a fair process? Libertarians advocate laissez-faire for the free market on this view Outcome-oriented notions focus on whether the process used to allocate resources yields fair results Some focus on the distribution of well-being, e.g., utilitarianism Moving purchasing power from higher to lower utility folks raises total utility due to declining marginal utility of income. “Behind the veil” social contract perspective of John Rawls.
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Social Welfare Functions Economists use social welfare functions to summarize judgments about resource allocations For each possible allocation, the function assigns a number that indicates the overall level of social welfare Higher numbers reflect greater social well-being
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Lecture Notes 9 - Equity Equity is harder to define and...

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