Consideration of Balance Between Efficiency and Equity
On one hand we can say that the market system is highly efficient. We can make all kinds of stuff, stuff that society wants at a very low cost that society places value on and will buy. We can glean every last ounce of efficiency out of labor, capital and land and are very good at producing things. However, the other side of the coin is distribution. Who gets what is left over; the surplus and profit that is derived from production? The question of Distribution is rising to the top of political discussion in policy and IMO, the Full Employment act is adding / morphing a macro goal of distribution. What are the headlines we see that prove that renewed emphasis? ‘Pay fair share, minimum wage increases, unfairness related to the 1%, the working class not sharing in the growth in the economy, living wage, student debt forgiveness, more progressive income tax rates, wealth tax, democratic socialism, etc. The stage is set then to editorialize. Capitalism can produce stuff efficiently, but can it automatically distribute the surplus? Or are the negative externalities, the social costs rising as efficiency increases?
Capitalism Production and Distribution Decisions decided by the private sector
Socialism Production decided by Private; Distribution by Public (Government)
Communism Both Production and Distribution Decisions decided by Public (Government)
That the capitalist/market system is so replete with negative externalities that the Government must step in to stop the abuse and create public policy to combat the issue. OR
That market efficiency will automatically lift ‘all boats’ and the everyone, every stakeholder will eventually benefit from efficient and growing markets.
That the profit motive equates to greed (ala Invisible Hand and Moral Sentiments (Smith)) OR that firms have ethical and moral compasses.
That moral hazard exists that reward business at the expense of society as a whole
Asymmetric Information gives more informational power to the seller (firm) than to the buyer
Stakeholder Centricity (the attention to all stakeholders) does not exist related to labor, the community, the environment and is centralized to the shareholder (owner, stockholder)
Jesuit Mission, Social Justice. A justice issue? A right?
Dialectic Thought; Over time and in very cyclical historical fashion, there is a pendulum aspect to societal change between the two concepts.
Is the balance between Efficiency and Equity an ‘Either OR’ or AND. Can we have our cake and eat it too?
How should we be processing and thinking about this?
Definition of Key terms
An objective explanation of the issue, the balance, the choice
Opinion in an editorial comes early and with impact
2-3 bullets of how we might agree in step wise fashion a discussion of this balance or choice.
A concise conclusion
What did you learn by doing this assignment?