Question

What may be the issues with the distributive efficiency as initially modeled by Vilfredo Pareto? In economics.

Answer 1

Dear Student,

Plerase find below answer to your question

Introduction

Distributive efficiency was initially modeled by Vilfredo Pareto to balance between demand and supply in economic market, but over the period of time due to recent economic changes there are various measure that need to be considered while implementing this policy.

Abstract

There is always Conflict Between Distributive Efficiency and Economic Efficiency. Ensuring an equitable distribution of resources may cause economic disincentives. For example, if people on high incomes see very high rates of marginal tax, they may stop working or work in another country. Therefore, society may see less output

Issues with the distributive effeciency

Economists have sometimes characterized "how" to produce as a "technological problem" of distributive efficiency whereas the allocation of what is produced is an "economic problem". In a free market, the "how" of production and allocation of resources is distributed among economic agents.

There are several different types of economic efficiency. The five most relevant ones are allocative, productive, dynamic, social, and X-efficiency. Allocative efficiency occurs when goods and services are distributed according to consumer preferences.

The main problems, are what to produce, how to produce and for whom to produce

Distributive efficiency occurs when goods and services are consumed by those who need them most.

Distributive efficiency is concerned with an equitable distribution of resources because of the law of diminishing marginal returns.

Conflict Between Distributive Efficiency and Economic Efficiency

Ensuring an equitable distribution of resources may cause economic disincentives. For example, if people on high incomes see very high rates of marginal tax, they may stop working or work in another country. Therefore, society may see less output.

There is a trade-off between increasing equity and causing disincentives to work and take risks.

Generally, there is an assumption that a free market needs a degree of inequality to create some incentives for entrepreneurship etc.

If you like the answer, Kindly subscribe and up vote

Thank You !!