(4 points) Rights and markets. “ We hold these truths to be self-evident that al
ID: 1198340 • Letter: #
Question
(4 points) Rights and markets.
“We hold these truths to be self-evident that all men are created equal, that they are endowed by their Creator with certain unalienable Rights that among these are Life, Liberty and the pursuit of Happiness.”
Thomas Jefferson, 1776.
a.(1 point) Give examples of how we recognize people as having rights to Life, to Liberty, and to the pursuit of Happiness. Give examples of how we do not recognize people as having these rights but make them conditional on success in the marketplace.
b.(1 point) Does your answer mean that we, as a nation, are insincere in our commitment to democracy and equality? How does Arthur Okun resolve this seeming contradiction?
c. (2 points) Evaluate the evidence relating income inequality and efficiency. Is Okun right? Consider the arguments in Chris Tilly, “Geese, Golden Eggs, and Traps” (article 7.1 in Real World Micro), and Gar Alperovitz and Lew Daly, “The Undeserving Rich” (1.6): do we need inequality to maintain an efficient economy?
Explanation / Answer
a. Life -- Laws to protect the environment, to protect air and water from pollution, laws to protect food and drugs from adulterants. Safety laws like car seatbelts, flame-proofing in childrens' sleepwear. Laws to keep guns out of the hands of criminals.
Liberty -- We are all free to live wherever we want, go to whatever school we can get into and pay for, to spend our money as we please, to travel, to spend our time however we like.
Pursuit of Happiness -- This means that we have the right to be happy. Whatever it is that makes us happy, it's our choice, so long as we don't step on anyone else's toes.
Everybody can do anything they please but the poor have very limited options because they do not have money.
b. We, as a nation, are insincere in our commitment to democracy and equality because of our prevalent problems with race, gender, and socioeconomic class discrimination today. These problems must be resolved before we can achieve true democracy and true equality.
Arthur Okun resolves this seeming contradiction by arguing that we allow inequality to promote efficiency.
c. Inequality reduces welfare. So, inequality reduces efficiency.
Arthur Okun was right in his analysis that there is a tradeoff between income inequality and efficiency.
In “Cause of Death” ( Real World Micro ), Reuss states that inequality is the cause of shorter life expectancies in poorer communities. Our poor communities consist mainly of people of color – racial discrimination is a significant problem in the United States, and it negatively affects economic efficiency. Competitive consumption lowers happiness because people become dependent on material goods to maintain their happiness. When people cannot get that they want, they cannot be happy. Therefore, we conclude that we do not need inequality to maintain an efficient economy.
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