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Working efficiently there is is underproduction

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Unformatted text preview: is underproduction underproduction or overproduction overproduction Is the Competitive Market Fair? Fair? Two broad approaches: – It’s not fair if the result isn’t fair. • “Why should daycare workers earn so little?” – It’s not fair if the rules aren’t fair. • “Affirmative action is unfair to young men!” It’s Not Fair If the Result Isn’t Fair Fair • Utilitarianism – Equality is fair and efficient – Transfer income so no rich and no poor – The problem with utilitarianism is • Income taxes reduce incentive to work, so total “pie” shrinks • Administrative costs of transferring income It’s Not Fair If the Rules Aren’t Fair Aren’t • symmetry principle – the requirement that people in similar situations be treated similarly. • Requires – Laws that establish and protect property are enforced – Private property can be transferred only by voluntary exchange Market Alternatives Market • • • • • • • Command Majority rule Contest First-come, First-served Lottery Personal characteristics Force...
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