Summary EC2A3 Revision Notes

, WEEK 4
-

Income Distribution- endowment , talent, effort, market prices
market
-




systemt> equity /because soldd (
multiperson household labour , use of capital , natural
-




, resources , tech,

time vs
space ,
ownership of property...
Gini
-




coefficient
~move eatt
I

A +B
Share of
equality line
income -
A
S
B
-


-


I
share of pop
rank
n -
G = Zim -




↓ d & deviation from mean.
are
#indiv income

can rank
-




cross-country but
challenging (time , source of income e. )
-


mult
exploitgains from trade and
give people freedom


&
=> ineq arise
VS
nK+ are
inherently unequal because they accentrate
underlying inequalities
to
gain freedom ; personal
agency outside control
process-based
-



us outcome base
- Just

, is
income
-



a
good proxy for utility ? Cardinal

B
V =
Ama
+




marginal utility of income (x+) AmdtB + 0
+ B 2
SOC (x+ B 1) (4+ B) Ama
-




-




tel-re? Mr
Depends on +B diminishing of income

=
I constant

71
increasing


if
diminishing :
=> Utilitarian prefer equality

utilitarian world
equalise income across people
Va + VB is
higher when income dist more equal

e Aalot income B
g.
.




no income
,


A consume lot of
a
goods , nu low
B
high Mr

takeAs wealth
give B =
NMU A bit & MV a lot
↳ Stop when
MV equal
if MV
increasing , app
constant , would not care

, Inequality social welfare transferring utility
-


aversion- think from richer
a by
to
poorer while preserving ranking + keep total V constant
Utilitarianism
I Rawisian

III X infinite It
X = [ (Mill*
no ia
w


VA $30 :
pre for equality

undermine
·




democracy ifequal wealth dist
v-
inequality
rewarding effort
innovation
-




-




risky e reward