16.4 Broader Social Goals Flashcards
Describe the distribution of income in a market economy
People whose services are in heavy demand relative to supply, such as good television news anchors, wise corporate CEOs, and outstanding hockey players, earn large incomes, whereas people whose services are not in heavy demand relative to supply, such as high school graduates without work experience, earn much less.
Explain the difference between temporary differentials and equilibrium differentials.
The temporary differentials, caused by changes in demand or supply in specific industries or regions, will eventually be eliminated by the mobility of workers. Equilibrium differentials will persist, whether they are created by differences in non-monetary aspects of the job or by differences in human capital or acquired or inherited skills.
Example of a preference for public provision
Police protection and justice could, in principle, be provided by private markets. Security guards, private detectives, and bodyguards all provide police-like protection. Privately hired arbitrators, “hired guns,” and vigilantes of the Old West represent private ways of obtaining “justice.” Yet the members of society may believe that a public police force is preferable to a private one and that public justice is preferable to justice for hire.
Examples on how the government protects people from each other
People can use and even abuse other people for economic gain in ways that members of society find offensive. Child labour laws, minimum standards of working conditions, and laws against physical abuse and sexual harassment are responses to such actions.
What is paternalism. What are some examples?
Intervention in the free choices of individuals by others (including governments) to protect them against what is presumed to be their own ignorance or folly.
Laws prohibiting the use of addictive drugs and laws requiring the use of seat belts are intended primarily to protect individuals from their own ignorance or short-sightedness.
Where do free markets fall short in regards to social goals
Even if free markets generated allocatively efficient outcomes, they would be unlikely to generate outcomes consistent with most people’s social goals. Furthermore, there is often a tradeoff between achieving these social goals and increasing allocative efficiency.
