Efficiency VS Equality The Big Trade-off

Efficiency VS Equality The Big Trade-off

About a century ago. man}’ ‘Western governments began to intervene in the marketplace and introduce a social safety netas a bulwark against socialist pressures- s-this new conception of society was called the “welfare state.” In the industrial democracies of Europe and North America. today generally finance retirement and health care for the’ aged; provide food. health care, and housing assistance for the indigent: replace lost income for the unemployed and disabled: and channel incomes and wage subsidies to the poor. These programs have removed the sting of abject poverty.

But reducing poverty has not come without cost or controversy. A large and growing share of government budgets goes to income-support programs. Taxes have risen steadily over the last half-century. Attempts to equalize incomes can harm incentives and efficiency. Today. people ask: How much of the economic pie must be sacrificed in order to divide it more equally? How should we redesign income-support programs to retain the objective of reducing want and inequality without bankrupting the nation?

The purpose of this chapter is to examine the distribution of income along with the dilemmas of policies designed to I reduce  inequality, These issues among the most controversial economic questions of today. It is here that cool-headed economic analysis of the trends in in- I comes and or the strengths and weaknesses of different programs will have a large payoff in promoting both .1 sense of fairness ami continued rapid growth of the mixed economy.

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