Distributive justice

One last point about Economics 101 may be the most important, is likely to be overlooked or even denied in the U.S. today. Economists claim they can show that if all their assumptions are true – perfect information, willing sellers and willing buyers, perfect competition, no externalities – the hypothetical free market will create what is called a Pareto optimum. That is a situation in which no person can be made better off without making someone else worse off. This is the basis of t he claim that the free market allocates resources “efficiently.” But there can be a Pareto optimum in which everybody has an equal or close to equal share; and one in which one person has 90% of the wealth and the remaining million people have 10%. The latter is actually much closer to the situa tion we’re in right now.But there is nothing in the theory of the market to support a claim that whatever distribution results is just, or fair, or desirable. If you don ’t think it’s fair that one person has 90% of the wealth, there is no reason in the theory of the market why you shouldn’t tax 99% of that wealth away and share it with everybody else. Maybe you can think of arguments against doing this, but they aren’t to be found in introductory economics. The question is simply ignored.Liberalism, in the modern sense, can be thought of as favoring government policy to repair the defects of the market, and make it more like the theoretical ideal. Environmental and workplace safety reg...
Source: Stayin' Alive - Category: American Health Source Type: blogs