ECON 367 Lecture 3: Econ 367 Lecture 3
Document Summary
Policy is po if: total benefits > total costs. Increase in ts = increase size of the pie, there does not have to be actual compensation. If compensation is actually paid, then ps: ppe is consistent with wealth max - wealth is max by the difference between benefits and costs. Think social contract: difference btw utils and wealth max? (utils = wtp and d. wealth = willing and able to pay) Implicit acceptance of the redistribution of income and 2. Basic policy trade off: free mkt: consensual exchange may lead to efficiency at the expense of equity, regulated mkt: non-consensual exchange may lead to potential pareto improvement but with losers. ***are efficiency and equity substitutes or complements? iv. Implied consent: social contract argument: one could argue that an individual will win some, lose some" but on net will be better off because the total surplus increase so the nominal quantity increased (ratio is the same)
