Equity and Efficiency in Economics
Through basic concept an economics that we want to keep in mind particularly as we investigate, there for situation and problems and possible solutions. We wanna discern the difference between Efficiency vs Equity, that is argument to make an economic system more efficient vs argument to make economic system more equitable.
Efficiency generally means operating the lowest possible cost for what you really is your producing, what are output you are creating. We argue in Microeconomics that free competitive markets would achieve get efficiency, they would true computational regulator they would keep prices on the market relatively low and this low prices would force firms to operate and minimum cost.
So that you and I the consumer are pay on a company, extra in the price because inefficient their slappy, their not very cost cost crashes on their operations. Efficiency is certainly goal we wanna make a very best use our best resource we can, we do not want to waste to them and any efficient means production, any efficient delivery systems.
This arguments for efficiency a major part of what is behind many proposals to privacy the provision government service, quick example supposed that the city provides for trash pick up, and the government in maybe buys the trucks the city government, Pays the employees and go around to pick up the trash.
Many times it is argued that because that government entity has no competition, it has no real need to keep it cost at their lowest point. And so it will become inefficient by allowing cost to rise and passing along to the consumers the tax payers in a way of higher pays, And the way limited that is to put the private company in there and let them pick up the trash and maybe even compete against other companies for one year, two years contract.
So that if keep their cost slow and therefore the price low they can renew all construct and that is would a competition keeps prices low, the consumers and create more efficient system. Private decision as supposed the government provision of the service abroad, so those are Efficiency arguments we were keep pricing low and cost low, we want companies to be Efficient and not waste their resources and the other side they are Equity arguments.
Equity meaning fair equitable fairness it is fair for example that everybody pay a teen percent of real income and some people say thats absolutely fair, that is ten percent for everybody but others will say that if you are very low income. Teen percent of your income is real bite and really hurts in your very survivability, were as teen percent were a multimillionaire that does trike in your survival and say what so many the teen percent task is not equitable is not fair.
But many we get equity argument what we want also were in to normative disagreements, were in normative or option by statements so would every issue we make argue equity. We may argue the efficiency we oath at least consider both the equity issues, and efficiency issues in any sort of economic problem or propose solution.
Alright now, our free competitive markets equitable they provide a fair treatment of all consumers and again equitation, we can get an opinions and some people will says will the problem free market is that whatever the price a lot of times people need that product service.
Like something can afford because here in comes to low, is that fair? lets take in education should government provide education this add efficiency resources or is education is better provided by private schools.
And if that is provides with the private schools will looking the provided price that the lower income that society can afford to pay, and if they cannot is that fair?
If they are the provide the educating of their children because their incomes are high, is that fair? and then stepped in with all kind of ways to offset that to sub todi low income groups, in fact what we see government provide the education for free to tax dollars, is that fair? Alright! and what basis do you raise your taxes, should we tax you on your property and how much you won.
Or what are more equitable or fair to tax you on your income or should we tax you money you spend with the sales tax, what is the most equitable tax outhere, the sales tax, the property tax, and the income tax. And again when you get the Equity Arguments you get an opinions, lets do not get buy down a lot differents opinion and arguments.
Lets something recognize the argue of what they are and they are fill to address also the efficiency issues. Thank you!