Arthur Okun argues that equality reduces efficiency A We accept inequality to

Arthur okun argues that equality reduces efficiency a

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Arthur Okun argues that equality reduces efficiency A. “We accept inequality to achieve more efficiency”/promotes economic efficiency and growth B. Free markets produce inequalities of income because some work harder than others and others are more productive - can reduce inequality only in a “leaky bucket” II. He also states that society has production possibility frontier of efficiency and equality A. More of one leads to less of another B. More equality cost efficiency - we buy efficiency by giving to rich more and reducing equality C. Greater income produced “trickles down” to the poor, making him accept a larger leakage of $95 abd cut taxes for the rich by $5 D. “Poverty is a spur to productivity and opulence is a reward III. We do little for those who are able to earn on their own, while we do more for those for the elderly and disabled because we don’t expect them to work A. Assumes that redistribution little effect on the work efforts of the disabled and children, fearing that the welfare reduces the efforts of adults IV. Little support for Okun's argiment A. He is partly wrong in his statement B. The “leaky bucket” problem gets these “leaks” a. Reducing total output (taking from the rich and giving to poor) can lead to loss of work incentives, meaning the rich won’t work because of taxes, and the poor to stop working because they can collect welfare b. Bureaucracy (unproductive government officials) collect taxes and supervise welfare - very expensive to operate c. Loss of incentive to create and take big risks for rewards d. There is relatively no association between inequality and greater efficiency e. The more unequal a community is, the more crime and transaction costs happen for police and guards, becoming social waste - suffer inefficiency f. Ignored filthy ways of getting rich g. From market capital, parents are encouraged to neglect their children due to non-redistribution of income to those who have earned it in the market V. Inequality reduces efficiency by fostering distrust. Equality can be efficient by promoting investments in human capital A. Americans want a more equal distribution of income

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