Fairness and Efficiency Flashcards

1
Q

Economics

A

The study of how people interact with each other and with their natural surroundings in providing their livelihoods and how this changes over time

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2
Q

Evaluating Economic Outcomes

A

Allocation: who does what and who gets what
- If allocation is efficient: could there be mutual gains from moving to some other allocation?
- Is allocation fair: If there’s some allocation that could be fair

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3
Q

Allocations and Values

A
  • Efficiency: There’s no alternative technically feasible allocation in which at least 1 person would be better off and nobody worse off
  • Fairness: Evaluation based on one’s conception of justice
    Values to consider:
    1. Diversity
    2. Social cohesion
    3. Individual dignity and freedom
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4
Q

The Pareto Efficient

A

If nobody can be better off without making somebody worse off

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5
Q

The Pareto Criterion

A

Helps us judge between two allocations
- Says nothing about fairness
e.g. unequal distribution of food- some people will starve is a PE as long as food is eaten by someone who enjoys it even a little.

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6
Q

Games

A

Describes a social interaction:
1. Players- who’s involved interactions
2. Feasible strategies- actions each player can take
3. Information- what each player knows when choosing their action
4. Payoffs- outcomes for every possible combination of actions

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7
Q

The Invisible Hand: when self-interest works

A

Pursuit of self-interest without regard to others can be considered morally bad, economics considers cases which it can lead to outcomes that are socially desirable.
- Choosing a strategy that yields the largest total payoffs.

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8
Q

Pareto Criterion for Policymakers

A

Few Pareto Improvements: policymakers makes changes that rarely = win-win situations:- losers from any policy changes
Compensation: Pareto Criterion doesnt take into account the possibility of the second stage of the game:- this leaves both players better off
When combined with compensating those losing out from policy change, the Pareto criterion starts being helpful.

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9
Q

Defining Fairness

A

Allocation can be judged unfairly by:
- How unequal they are: In terms of income etc, these are substantive judgement of fairness based on characteristics of the allocation itself
- How inequalities came about: In terms of racial discrimination etc, these are procedural judgements of fairness

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10
Q

Procedural judgements of fairness

A

Evaluates rules of the game through:
- Voluntary exchange of private property acquired by legitimate means
- Equal opportunity for economic advantage
- Deservingness

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11
Q

Implementing Public Policies

A

Outcome of a public policy is the result of an interaction between the government’s actions and the privately chosen actions of those affected

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12
Q

Policies Effect on Economic Outcomes

A

Incentives: A policy changes the benefits or costs of alternative courses of action open to the individual.
The information available: People can use all available information when they make decisions about which actions to take.
- New Allocation wont be unless it’s a Nash Equilibrium

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