Against current conceptions of the equity-efficiency trade-off
I cited the current use of that trade-off as the thing that bugs me most about the economics profession. Here is my Bloomberg column, and here is one excerpt:
The equity-efficiency trade-off, in its simplest form, argues that economists should consider both equity (how a policy affects various interested parties) and efficiency (how well a policy targets the party it is intended to affect) in making policy judgments.
So far so good. I start getting nervous, however, when I see equity given special status. After all, it most often is called “the equity-efficiency trade-off,” not “an equity-efficiency tradeoff,” and it is prominent in mainstream economics textbooks. By simply reiterating a concept, economists are trying to elevate their preferred value over a number of alternatives. They are trying to make economics more pluralistic with respect to values, but in reality they are making it more provincial.
If you poll the American people on their most important values, you will get a diverse set of answers, depending on whom you ask and how the question is worded. Americans will cite values such as individualism, liberty, community, godliness, merit and, yes equity (as they should). Another answer — taking care of their elders, especially if they contributed to the nation in their earlier years — does not always show up in polls, but seems to have a grip on many national policies and people’s minds.
I hear frequently about the equity-efficiency trade-off, but much less about the trade-offs between efficiency and these other values. Mainstream economists seldom debate the value trade-offs between efficiency and individualism, for instance, though such conflicts were of central concern to many Americans during the pandemic…
Surveys have shown that a strong majority of academic economists prefer Democrats. Yet most economists, including Democrats, should pay more attention to the values of ordinary Americans and less attention to the values of their own segment of the intelligentsia. That also would bring them closer to most Democratic Party voters, not to mention swing voters and many Republicans. Equity is just one value of many, and it is not self-evidently the value economists ought to be most concerned with elevating.
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