A linchpin between efficiency and equality is infrastructure reliability


A good deal has been written arguing that economic efficiency and equality in economic well-being can move in the same direction (e.g., healthier people are more economically productive). But the dominant view remains the two are in The Big Tradeoff: more equality means less efficiency. Most economists have shifted little from the postulate that efficiency assumes market-clearing prices based on whatever distribution of wealth and income is in place, where to privilege one distribution over another isn’t really what economics is all about.

All this is curious from the perspective of the social sciences: Why would anyone take a movement in efficiency (or equality) to be caused by a movement in the other rather than caused by some intervening variable affecting both efficiency and equality independently?


More institutionally-informed economists say they do talk about such intervening variables as critical infrastructure reliability, at least in the form of secure property rights that underpin gains in economic efficiency. Those, nevertheless, are second-order considerations. For when economists talk about the necessity of “secure property rights,” what they really mean is a hugely reliable contract law, insurance and title registration infrastructure is in place and “always on.”

Could it also be, for example, that consumption is frequently less unequal than income precisely because critical infrastructures have been more reliable and more efficient when it comes to the delivery and distribution of goods and services than they have been in the creation and generation of income opportunities for those doing the consuming?

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