Efficiency and Equity in Economics
Efficiency in economics is concerned with the
optimal production and distribution of resources. Productive or economic
efficiency occurs when the largest amount of goods and services are produced
with a given amount of inputs or resources. Allocative efficiency occurs when
goods and services are distributed according to consumer preferences. Allocative
efficiency can be obtained when no one can be made better off without making
someone else worse off, which is also known as Pareto efficiency. Productive
and allocative efficiency can be attainable when we assume perfect competition.
Equity occurs if a society distributes its economic resources or benefits
fairly among its people. Equity and fairness are often interchangeably used.
Efficiency and equity do not
seem to go hand in hand. How can the market economy with perfect competition
attain equity in a society (although it can attain both productive and
allocative efficiency)? To attain equity in the society, those people who make more
money are willing to pay higher taxes and the taxes may be used to help the
poor for the society as a whole to be better off. However, as Shane Hall
states, higher tax rates on high income people will reduce their incentive or
reward for working hard and thus result in less production.[1]
Torben Anderson and Jonas Maibom explain that when countries are inside the
opportunity set, that is, when the country is both less efficient (in terms of
economic performance) and less equitable (in terms of income equality), then there
is a scope of improvements in both economic performance (efficiency) and income
equality (equity).[2] Otherwise, more equal (or
fair) distribution of income can be possible at the cost of economic
performance (efficiency).
John Buck states: “People
who think markets provide a generally fair distribution of output among the
population tend to oppose government intervention in the marketplace. This is
the position of most traditional conservatives, who usually favor a very
limited government role in the economy. People who think markets create an
unfair distribution of output tend to favor a larger role for government in the
redistribution of wealth. Traditional liberals tend to favor this position.”[3]
That is, the conservative Republicans prefer the small government claiming
markets already provide fairness whereas the liberal Democrats prefer the big
government claiming markets cannot resolve the issue of unfairness. Many
economists believe competitive markets are efficient, however they may not be
fair in distribution.
Efficiency and Equity in the Bible
Jethro, Moses’ father-in-law, in Exodus
18:13-27 advised Moses to select capable and honest men to help him when he
judged the Israelites to be more effective and save time. That is, by sharing
heavy burden with others according their ability, we can do the work for God
more efficiently. Jethro in Exodus 18:21-22 tells Moses: “21Moreover
choose able men from all the people, such as fear God, men who are trustworthy
and who hate a bribe; and place such men over the people as rulers of
thousands, of hundreds, of fifties, and of tens. 22And let them
judge the people at all times; every great matter they shall bring to you, but
any small matter they shall decide themselves; so it will be easier for you,
and they will bear the burden with you.”
The twelve apostles in Acts
6:1 were busy with both the daily distribution of food and preaching, so they
could do neither duty well. Yet, there were complaints by the Hellenistic Jews
against the Hebraic Jews. So, they decided to choose seven men among the
disciples who were known to be full of the Spirit and wisdom and let them do
the responsibility of the daily distribution of food (Acts 6:3). Then, the 12
apostles could give their attention to prayer and the ministry of word (Acts
6:4). This is a way of doing God’s work – prayer, the ministry of word, and
distribution of food – more efficiently not being burdened too much by a
routine work.
Paul in 1 Corinthians
12:4-31 and Ephesians 4:1-16 mentions various spiritual gifts given to the
members of the church, and unity and diversity of the body of Christ. God
allowed various gifts to various members of the church, the body of Christ, for
them to work for God efficiently when they understand the will of God and each
of them does his/her best with God-given gifts. Paul could accomplish many
things in his ministry for God as he cooperated with his coworkers (Paul with
Barnabas in Acts 13-15; Paul with Silas, and Timothy later in Acts 16-17; Paul
with Aquila and Priscilla in Acts 18; Paul with Luke and other coworkers in
Acts 20-28).
2.
Equity
Equity is one of the important biblical
themes, and thus we can find many examples. 2 Samuel 8:15 (also 1 Chronicles
18:14) states: “David reigned over all of Israel, administering justice and
equity (צְדָקָה, tsedaqah) to every one of his
people” (ISV). The Hebrew word צְדָקָה (tsedaqah)
is also translated as ‘righteousness,’ ‘honesty,’ or ‘justice.’[4]
That is, an equitable activity may be regarded as righteous, honest, or just.
The Psalmist in Psalm 9:8
states: “He (=God) rules the world in righteousness (צֶדֶק, tsedeq) and judges his people with equity (מֵישָׁר, meshar). The Hebrew wordמֵישָׁר (meshar) is also translated as ‘uprightness,’ ‘fairness,’ ‘equity,’ or ‘evenness.’[5]
The meanings of the two Hebrew words are similar to each other. By using the
two similar words together, God’s fair or impartial (and his people’s)
government is emphasized. Prophet Isaiah in Isaiah 11:1-5 prophesies about the
coming Messiah (Christ), and states: “but with righteousness he will judge the
needy and decide with equity for earth’s poor.” (11:4a, ISV)
As we discussed in Chapter 10,
God is fair or equitable in distribution. Exodus 16:18 states: “And when they
measured it by the omer, the one who gathered much did not have too much, and
the one who gathered little did not have too little. Everyone had gathered just
as much as they needed.” Furthermore, God wants his people to share their
possessions with the poorer ones. This is a way in which God’s equity can be
realized. Moses in Deuteronomy 15:7-8 states: “7If there is among
you a poor man, one of your brethren, in any of your towns within your land
which the LORD your God gives you, you shall not harden your heart or shut your
hand against your poor brother, 8but you shall open your hand to
him, and lend him sufficient for his need, whatever it may be.”
Thus, Paul emphasizes his
economics of equality, sharing what you are rich now with those who are poor in
what you are rich so that they may share what they will abound with you who may
be poor in what they will abound in the future. Paul’s teaching of equality is
to reduce inequality whether it is material wealth or spiritual wealth.
3.
Efficiency versus Equity
As we reviewed at the beginning of this
chapter, there is usually a trade-off between efficiency and equity. That is,
to increase efficiency, equity may be reduced; or to increase equity (or to
reduce inequality), efficiency may be reduced as people may lose their
incentives to work hard and thus become less productive. We see this in the
example of socialism or communism where people’s incentives to work hard may be
reduced as they cannot possess their own wealth.
However, as we see in Acts
2:43-47 and 4:32-35, efficiency and equity can be in harmony when people’s
incentives to work hard are not denied but encouraged further by their noble
goal or purpose of life. When Christians initiate their love of neighbors by
voluntarily sharing their possessions with them, they may work harder to make
more profit and share more plenty with more people.
[1]
Shane Hall, “Economics:
Equity vs. Efficiency,” Bizfluent. (September 26, 2017). Retrieved from
https://bizfluent.com/about-7230309-economics--equity-vs--efficiency.html.
[2]
Torben M. Anderson and Jonas
Maibom, “The Trade-Off between Efficiency and Equity,” VOX. (May 29,
2016). Retrieved from https://voxeu.org/article/trade-between-efficiency-and-equity.
[3]
John Buck, “Economic
Efficiency and Equity,” Economic Perspectives. (February 10, 2008).
Retrieved from
http://econperspectives.blogspot.com/2008/02/economic-efficiency-and-equity.html.
[4]
Strong’s Hebrew Concordance,
“6666. tsedaqah,” BibleHub.
Retrieved from https://biblehub.com/hebrew/6666.htm
No comments:
Post a Comment