Readers Question: Pareto efficiency occurs (as you say) ‘when it is impossible to make one party better off without making someone worse off’. Assume (and Economics seems to do this a lot) two people live in the world. One is a multi-billionaire and the other has no money at all. If the rich guy gives …
The current US administration have suggested they want to increase the US budget deficit to enable higher rates of economic growth. What does economic theory state about this idea? “We need to have new deficits because of that. We need to have the growth,” Mulvaney said. “If we simply look at this as being deficit-neutral, …
The current US administration is proposing tax cuts which ‘The Committee for a Responsible Federal Budget’, estimates it will include $5.8 trillion of total tax cuts over the decade and a net cost of $2.2 trillion through 2027. The problem with these tax cuts It is unclear how these tax cuts will be financed. An …
Readers Question: Is it possible to construct the economic system so that does not rely on expanded growth which as we all know, is damaging the environment? causing pollution e.t.c. Could we have a society without economic growth? or as economists might prefer to answer – Can we have environmentally sustainable economic growth? To promote …
Voluntary unemployment is defined as a situation where the unemployed choose not to accept a job at the going wage rate. Reasons for voluntary unemployment Generous unemployment benefits, which make accepting a job less attractive. High marginal tax rates, which reduce effective take home pay. Unemployed hoping to find a job more suited to skills/qualifications. …
Definition of Pareto efficiency Pareto efficiency is said to occur when it is impossible to make one party better off without making someone worse off. A Pareto improvement is said to occur when at least one individual becomes better off without anyone becoming worse off. Pareto efficiency will occur on a production possibility frontier. When …
This is a concept that individuals have two different sets of decision-making processes. The first is impulsive, fast and acts without thinking. The first is impulsive, fast, emotional and acts without thinking – but relies on heuristics and past knowledge/experience. The second element of our decision-making system is a more cognitive, deliberate, thinking process which …
Readers Question: I would like to know why in the USA we have minimum wage law but not a maximum wage law? What are the advantages and disadvantages of a maximum wage law? A maximum wage means that for specified industries, jobs, wages cannot exceed a certain level. They may be used to regulate labour …