Week 6 - Property and Power Flashcards
What is Rawls’ veil of ignorance?
Taking an impartial perspective of what is fair by not considering how an allocation will impact you personally
What is the Pareto Criterion?
It is a method for assessing different alternative potential outcomes (ie allocations)
What is a an allocation?
A particular outcome of an economic transaction characterised by who DOES what and who GETS what
What is Pareto Efficiency?
If there is an allocation in which no one can be better off without making someone worse off
What is efficiency?
When highly valued goods and services are produced at the lowest cost
What are the two types of criteria for evaluating outcomes?
Objective - Pareto Efficiency
Subjective - Fairness (substantive and procedural justice)
What did Kahneman et al. point out about economic efficiency and fairness?
There is a trade-off between efficiency and fairness.
Why?
Because most people’s perception of fairness requires allocating or distributing goods and services based on equal opportunity rather than based on who can offer the highest exchange of value for that good or service.
What is economic efficiency?
When all goods and services are allocated and distributed to their most valuable uses and waste is eliminated or minimised
What are the two CORE-ECON approaches to fairness?
Procedural Notions: evaluate an outcome/allocation based on how it came about rather than the characteristics of the outcome itself
Substantive Notions: evaluate an outcome/allocation based on the allocation itself rather than how it came about
What is the CORE-ECON approach to fairness?
It draws a distinction between two different approaches to perceiving fairness; procedural and substantive notions.
What is a Pareto Improvement?
If at least one player/agent can be made better off without making any other player/agent worse off
