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Efficiency vs. Equity

The issues between efficiency and equity have always been a contentious political debate. Efficiency means that society is getting the most it can from its scarce resources. A more efficient society can produce more with the same amount of resources. Equity means that the resources are distributed fairly among the individuals. We can view efficiency as the size of a pie, and equity being how evenly the pie is being divided. When government policies are being made, there is always a conflict between the two goals because we have to sacrifice one in order to gain the other. Now we introduce the idea of tradeoffs. In order to get one thing that we like, we usually have to give up something else. For example, if we spend more time on the job, we will have less time to spend on leisure. If we sleep more, we will have less time to study. Efficiency and equity is in fact one of the biggest tradeoffs that a society will face. When government designs its policies, it has to make sure that the society is making the maximum use of its scarce resources while also making sure that the distribution of the benefits received by using the resources is divided somewhat evenly among the citizens. Imagine the pie that we started with, it gets smaller and smaller as we try to divide it evenly. As the pie gets smaller, everybody will eventually get a smaller piece of the pie. That is the problem we will create if we want more equity and sacrifice the efficiency. The argument for equity is that it maximizes the total utility or happiness in a society. It is based on the idea that an extra dollar of income for a poor person provides that person with more happiness than an extra dollar of income to a rich person. Even though the total utility will be maximized by perfect equity, a society can never reach the point of perfect equity simply because people respond to incentives. If the government collects everybody’s income and redistributes i...

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Efficiency vs. Equity. (1969, December 31). In DirectEssays.com. Retrieved 12:31, August 20, 2014, from http://www.megaessays.com/viewpaper/26284.html