Equality and Efficiency

Equality and Efficiency: The Big Tradeoff

ARTHUR M. OKUN
FOREWORD BY LAWRENCE H. SUMMERS
Copyright Date: 2015
Pages: 156
https://www.jstor.org/stable/10.7864/j.ctt13wztjk
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    Equality and Efficiency
    Book Description:

    Originally published in 1975,Equality and Efficiency: The Big Tradeoffis a very personal work from one of the most important macroeconomists of the last hundred years. And this new edition includes "Further Thoughts on Equality and Efficiency," a paper published by the author two years later.

    In classrooms Arthur M. Okun may be best remembered for Okun's Law, but his lasting legacy is the respect and admiration he earned from economists, practitioners, and policymakers. Equality and Efficiency is the perfect embodiment of that legacy, valued both by professional economists and those readers with a keen interest in social policy. To his fellow economists, Okun presents messages, in the form of additional comments and select citations, in his footnotes. To all readers, Okun presents an engaging dual theme: the market needs a place, and the market needs to be kept in its place.

    As Okun puts it: Institutions in a capitalist democracy prod us to get ahead of our neighbors economically after telling us to stay in line socially. This double standard professes and pursues an egalitarian political and social system while simultaneously generating gaping disparities in economic well-being.

    Today, Okun's dual theme feels incredibly prescient as we grapple with the hot-button topic of income inequality. In his foreword, Lawrence H. Summers declares: On what one might think of as questions of "economic philosophy," I doubt that Okun has been improved on in the subsequent interval. His discussion of how societies rely on rights as well as markets should be required reading for all young economists who are enamored with market solutions to all problems.

    With a new foreword by Lawrence H. Summers

    eISBN: 978-0-8157-2654-8
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. FOREWORD
    (pp. vii-xii)
    LAWRENCE H. SUMMERS

    I still remember the excitement with which I first read Arthur Okun’sEquality and Efficiency: The Big Tradeoffas a first-year graduate student. It was the antithesis of the first-year economic theory sequence in which I was mired: a thoughtful, engaging, rigorously logical analysis of real issues that were crucial to the well-being of the American people. His text helped me realize that I had become an economist because I, like Okun, wanted to devote my career to thinking about—and on occasion to helping to act on—major public policy issues.

    I was impressed and influenced especially by two...

  4. CHAPTER ONE RIGHTS AND DOLLARS
    (pp. 1-30)

    American society proclaims the worth of every human being. All citizens are guaranteed equal justice and equal political rights. Everyone has a pledge of speedy response from the fire department and access to national monuments. As American citizens, we are all members of the same club.

    Yet at the same time, our institutions say “find a job or go hungry,” “succeed or suffer.” They prod us to get ahead of our neighbors economically after telling us to stay in line socially. They award prizes that allow the big winners to feed their pets better than the losers can feed their...

  5. CHAPTER TWO THE CASE FOR THE MARKET
    (pp. 31-62)

    Unlike the equal rights discussed in chapter 1, the economic institutions of the United States rest on voluntary exchange and on private ownership of productive assets; and they involve money rewards and penalties that generate an unequal distribution of income and wealth. Thus the anatomy of the American economy contrasts sharply with the egalitarian structure of its polity. At the same time, the functioning—indeed, the very life—of the market depends on the coercive powers of political institutions. The state uses these powers to establish and ensure rights in the marketplace, directly supply some essential services, and indirectly generate...

  6. CHAPTER THREE EQUALITY OF INCOME AND OPPORTUNITY
    (pp. 63-85)

    The concept of economic equality is hard to define or to measure. It might be impossible to recognize complete equality if it existed; but inequality is very easy to recognize. A short trip from the dreary slums to the classy areas of the suburbs is an interplanetary voyage measured in economic differentials. But it takes the traveler through a lot of territory occupied by the middle class, whose economic status is neither dreary nor classy.

    As a foundation for the discussion of policy measures to narrow differentials, I shall describe in general terms (with only a handful of facts and...

  7. CHAPTER FOUR INCREASING EQUALITY IN AN EFFICIENT ECONOMY
    (pp. 86-116)

    This essay began with a visit to the domain of social and political rights in which society gives priority, at least in principle, to equality over economic efficiency. It moved into the marketplace and other economic institutions, in which efficiency gets priority and a large degree of inequality is accepted. It then inspected a few bright prospects for increasing economic efficiency and equality simultaneously. Those prospects are important, but they are limited. Frequently, society is obliged to trade between efficiency and equality. Those trades pose the difficult choices and they are the subject of this final chapter.

    If both equality...

  8. FURTHER THOUGHTS ON EQUALITY AND EFFICIENCY
    (pp. 117-148)

    I have recently expressed in some detail my views on the goal of equality in our society, particularly in relation to the goal of efficiency.¹ I trust that it will come as no surprise to readers of this paper that I have not yet accumulated a brand-new stock of ideas, nor am I yet ready to recant. Rather, I shall use this occasion to elaborate on some of the central issues, presenting them at a level appropriate for an audience of professionals, rather than of interested laymen.

    Implicit in my book (and more explicit in this paper) is a reliance...

  9. INDEX
    (pp. 149-156)
  10. Back Matter
    (pp. 157-158)