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Lecture 5

ECON BC 2075y Lecture Notes - Lecture 5: Pareto Principle, 2Degrees, Externality

Course Code
ECON BC 2075y
Belinda Archibong

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Welfare and Efficiency Part II
Test Info:
Multiple choice comes from slides
Short question/ math→ hw questions
Extra credit from readings
Session 5 Topics
Pareto efficiency, PI
Pareto principle
Efficiency and externalities
Kaldor-Hicks and cost- benefit analysis
Example of alt-right and rise of right wing nationalism
Efficiency vs empathy → circular system / externalities
○ Fairness
Govt can act in way to change or shape our preferences into something else
Role of economics in shaping preferences
Are economists complicit in proliferation of these type of people?
Incomplete info
Try to deal with positive and normative but have trouble with the morals of
it because it's personal
If people aren't happy it has to do with pareto efficiency → preferences
You can't do something without upsetting someone else
Do the beliefs that preferences come from matter?
Ex. alt right - even though not most benevolent source of beliefs
Why is it that preferences aren’t discussed when making policy?
When considering most efficient outcome, only narrow group’s well being/
preferences actually matter
Why do we elevate satisfaction of people’s preferences if these preferences are
not the most humanitarian?
Nothing to distinguish whose preferences take precedence
Modifying Preference Satisfaction View
Preference satisfaction for rational, well-informed, self-interested preferences...what is
rational to prefer?
Objectivist views Rawls
Whose Well-Being/Welfare?
Against a nationalistic view of well-being? Pritchett, Hueber
The case of immigration, immigrants and welfare
What is the Hueber story of Sam and Marvin?
Marvin goes to store to get cheap bread
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