Policy Trade-offs

My son is involved in Special Olympics programs, and his current activity is basketball. At a recent game, I noticed that while his team was warming up, waiting for the other team to show, there were a large number of young boys from the local community shooting at other baskets in the gym.

I was reminded how policy decisions generally involve a trade-off between equity and efficiency. Certainly reserving the gym for my son's team to use for practice and games involves providing equity, given the small number of people on the team vs. the number of who could/would be using the facility.

Making the facility available to the larger numbers would be more efficient use of resources, but would not be equitable to the small group of Special Olympians who play on the team.

When discussing policy options with my students I used to ask them to analyze the proposal a number of ways, but always to consider equity vs. efficiency, and to remember that one frequently comes at the expense of the other.

Your thoughts, as always, are welcome.

Posted by TSchilling at December 22, 2005 2:56 PM

Comments
Equity versus efficiency may be an artificial dichotomy. We could parse the definitions of both, but given that value is totally subjective, and the practice of being able to measure value (the exercises of diminishing marginal utility) we can adequately state that the value the Special Olympian receives in utilizing the gym is likely far greater than the utility others would receive for that same time. Therefore, making the scarce gym space available to all increases the efficiency of distribution of this scarce space, and to get away from the 'cold, dismal science', makes all of us realize what is truly important, providing us an attitude adjustment in what really counts in the long run. Equity and efficiency may be the same thing.

Posted by: Robert Wiersema at December 26, 2005 3:58 PM

Utility and Value, Part II

One of the interesting things about teaching economics is that it allows students to see that it is the individual in society that makes up the composite--that the national data that is reported is nothing less than millions upon millions of individual choices that have been made and acted upon.

The blog Asymmetrical Information (link to this post is no longer available) once hosted an interesting discussion. The author posted her thoughts on handling money on December 9, 2005. There were a large number of comments, many of them attacking her (unjustifiably, I thought) for her allegedly New York-centric view of what constitutes the good life.

But subsequent entries (and comments) showed that her view was that value (as she defined it) arose from utility--what made things, places, events most useful to her. The postings and comments can lead your students down an interesting path about what constitutes value and whether value is determined in the production or the
consumption of a good or service.

As Rod Serling used to say, "submitted for your approval."

Posted by TSchilling at 6:05 PM Comments (0)

Simple Rules

Over at The Dismal Educators blog, the November 28 post lists Ten Rules of Economic Thinking. It's useful and could easily be posted in your classroom.

Another, similar item is the "Handy Dandy Guide" to economic thinking. It is used in many of the materials produced by the National Council on Economic Education, particularly their Capstone Course. The Handy Dandy Guide goes something like this.

1. People choose.

2. People's choices involve costs.

3. People respond to incentives in predictable ways.

4. People create economic systems which influence individual choices and incentives.

5. People gain when they trade voluntarily.

6. People's choices have consequences which lie in the future.

These, too, could be posted and referred to as you discuss economic issues and topics.

I look forward to hearing about similar lists or your comments about these lists.

Posted by TSchilling at December 12, 2005 4:33 PM