Efficiency, equity, sustainability and ethics in economic judgements

Overview

Recall questions on efficiency versus equity, ethics and sustainability in economic judgements, weighing conflicting evidence, and using historical context to evaluate policy.

What you need to know

Answer each one before you reveal it.

Questions from this subtopic

Each one with the model answer underneath.

1. 1

   What is the difference between asking whether an outcome is efficient and asking whether it is fair?

   Model answer

   Efficiency asks whether resources are allocated so that the value produced from them is as large as possible, while fairness asks how the resulting gains and losses are shared out; an outcome can be efficient and still be judged unjust.

2. 2

   Give an example of a market outcome that is efficient on the market's own criterion yet ethically objectionable.

   Model answer

   A market allocates a scarce life-saving treatment to whoever is willing and able to pay the most, which is efficient by the test of willingness to pay, but is widely judged unjust because ability to pay reflects income rather than medical need.

3. 3

   What does a sustainability test add to the judgement of an economic policy that growth figures alone miss?

   Model answer

   It asks whether the level of activity can be maintained — whether natural capital and finite resources are being run down, and whether costs are being displaced onto future generations who have no say in today's decisions — because output figures record a flow and say nothing about the stock being consumed to produce it.

4. 4

   Why do moral and ethical questions about economic activity take a different form at global level than at national level?

   Model answer

   Costs and benefits cross borders, so production in one country can impose environmental or labour costs on people in another, and no single government is accountable to everyone affected or able to compensate them.

5. 5

   What makes an economic judgement well-founded rather than merely asserted?

   Model answer

   It follows from evidence and reasoning already set out in the argument, it confronts the strongest opposing point rather than ignoring it, and it states the conditions under which it holds.

6. 6

   How should you weigh two pieces of evidence that point to opposite conclusions?

   Model answer

   Compare how each was measured, how recent and how representative it is, and whether both actually address the same question; then say which you judge the stronger and why, instead of reporting both and leaving the conflict unresolved.

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