Answer to Question #94841 in Macroeconomics for Machyar Hadi Azra

Question

Discuss each of the following statements from the stand point of equality and efficiency.
a."Everyone in society should be guaranteed the best healthcare possible."
b."When workers are laid off, they should be able to collect unemplayment benefits until they find a new job."

Answer 1

At first, terms of equality and efficiency have to be determined.

Efficiency means getting more benefits from scarce resources. Principle of equity suggests fair distribution of benefits among all economic agents.

Guaranteed healthcare policy matches the principle of equity, but it doesn't meet the principle of efficiency. It can be explained by the fact that the marginal benefit of maintaining additional healthcare resource (good medical staff or modern hospital equipment) is always less than marginal cost on their formation. 

The policy of guaranteed benefits for unempoyed workers suggests the principle of equity for all members of society in meeting their basic needs. At the same time it doesn't match the principle of efficiency since it doesn't motivate people to look for a job and causes decrease of supply on the labor market.