User talk:Jackson744
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[edit] Welcome
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[edit] efficiency
I thought I'd move this here seems it doesn't seem to have much to do with the K-H article anymore (plus I'm running out of colons to indent =) ): You write:
- "Well, you're mising the allocative efficient side of the more inclusive top-level efficiency. If both produce all of one and the other produces all of the other (assuming each has a comparative advantage to produce one or the other), and they make all possible mutually beneficial trades (barring the traditional market failures), then you'll have both allocative and productive efficiency, both of which are necessary to achieve a broader top-level efficiency"
and in the article:
- "This is because, at any give point along the PPF, no one person can be made better off without making at least one person worse off."
What person exactly is made worse off? Thanks in advance for the effort, I really appreciate! RoyalTS 10:15, 7 March 2006 (UTC)
-
- If any allocation of resources lies along the contract curve and, thus, along the PPF, you cannot have ANY improvements (Pareto or K-H), because you can't produce more as an economy. A Kaldor-Hicks efficient allocation of resources lies along the PPF. Thus, since one person cannot be made better off without making one person worse off (to make one better off without making both worse off or to make both better off would require moving beyond the PPF), it is Pareto efficient. Now, of course, this also assumes the traditional assumptions of perfect markets, but then again, so does all of Kaldor-Hicks and Pareto for simplicity's sake (just like the Robinson Crusoe example assumes many simplifying assumptions).Jackson744 18:06, 7 March 2006 (UTC)
- I get the part about efficiency in production, that along the contract curve no more of one good can be produced without producing less of the other. But is the situation in which only one good is produced really Pareto efficient. Or maybe I should ask: At what level is this decided? It seems to me that it should be higher-level efficiency we should be concerned with here, i.e. not only whether consumption and production are efficient, but also whether they are congruent. Surely, there are plenty of higher-level Pareto-improvements possible if the starting situation is one in which only one of the goods is produced. RoyalTS 19:16, 7 March 2006 (UTC)
- I'm not sure what you mean by, "only one good is produced". If you mean that, in a simple two good, two person economy, only one of the two goods is being produced, then it's because they value, at the margin, the last unit of the good being produced more than the initial unit of the good not being produced. In other words, if both are producing x, but neither y, and at least one of them were to value an additional unit of y more than an additional unit of x, then they would be willing to pay more than one unit of x to get said unit of y. But if none of good y are being produced, it's because the marginal willingness to pay for the first unit of y is less than the marginal willingness to accept, or more formally, the marginal cost of producing the first unit of y exceeds the marginal willingess to pay.Jackson744 19:54, 7 March 2006 (UTC)
- When you write "This is because, at any give point along the PPF, no one person can be made better off without making at least one person worse off." this does not strike me as obviously true. If you start out at one of the corners of the PPF (as an extreme case), then there are many ways in which people could be made better off by reshuffling production, ways which would make people better off without harming another or even making all people better off. The points on the PPF are only efficient in the sense that no inputs are wasted unnecessarily, not in a greater societal sense, no? RoyalTS 22:40, 7 March 2006 (UTC)
- Well, no - it literally is impossible to make somebody better off without making somebody worse off under any allocation which lies on the PPF. Think about it - the economy is already producing as much as it possibly can. Therefore, it is impossible for one person to get more without another person getting less. Like I said before, this assumes idealized market conditions, as all of these models of social welfare do (it would be impossible to model real life with any degree of simplicity or accuracy).Jackson744 23:20, 7 March 2006 (UTC)
- Well yes, it would be impossible to produce some of the good that was hitherto not produced without giving up some of the good originally produced exclusively. But when we're talking Pareto optimality, we're talking about utility, no? Utility that comes from the consumption of those goods, not their production. And if that is our criterion, then moving away from the corner does make at least one of the two agents better off without harming the other. RoyalTS 00:47, 8 March 2006 (UTC)
- Well, no - it literally is impossible to make somebody better off without making somebody worse off under any allocation which lies on the PPF. Think about it - the economy is already producing as much as it possibly can. Therefore, it is impossible for one person to get more without another person getting less. Like I said before, this assumes idealized market conditions, as all of these models of social welfare do (it would be impossible to model real life with any degree of simplicity or accuracy).Jackson744 23:20, 7 March 2006 (UTC)
- When you write "This is because, at any give point along the PPF, no one person can be made better off without making at least one person worse off." this does not strike me as obviously true. If you start out at one of the corners of the PPF (as an extreme case), then there are many ways in which people could be made better off by reshuffling production, ways which would make people better off without harming another or even making all people better off. The points on the PPF are only efficient in the sense that no inputs are wasted unnecessarily, not in a greater societal sense, no? RoyalTS 22:40, 7 March 2006 (UTC)
- I'm not sure what you mean by, "only one good is produced". If you mean that, in a simple two good, two person economy, only one of the two goods is being produced, then it's because they value, at the margin, the last unit of the good being produced more than the initial unit of the good not being produced. In other words, if both are producing x, but neither y, and at least one of them were to value an additional unit of y more than an additional unit of x, then they would be willing to pay more than one unit of x to get said unit of y. But if none of good y are being produced, it's because the marginal willingness to pay for the first unit of y is less than the marginal willingness to accept, or more formally, the marginal cost of producing the first unit of y exceeds the marginal willingess to pay.Jackson744 19:54, 7 March 2006 (UTC)
- I get the part about efficiency in production, that along the contract curve no more of one good can be produced without producing less of the other. But is the situation in which only one good is produced really Pareto efficient. Or maybe I should ask: At what level is this decided? It seems to me that it should be higher-level efficiency we should be concerned with here, i.e. not only whether consumption and production are efficient, but also whether they are congruent. Surely, there are plenty of higher-level Pareto-improvements possible if the starting situation is one in which only one of the goods is produced. RoyalTS 19:16, 7 March 2006 (UTC)
- If any allocation of resources lies along the contract curve and, thus, along the PPF, you cannot have ANY improvements (Pareto or K-H), because you can't produce more as an economy. A Kaldor-Hicks efficient allocation of resources lies along the PPF. Thus, since one person cannot be made better off without making one person worse off (to make one better off without making both worse off or to make both better off would require moving beyond the PPF), it is Pareto efficient. Now, of course, this also assumes the traditional assumptions of perfect markets, but then again, so does all of Kaldor-Hicks and Pareto for simplicity's sake (just like the Robinson Crusoe example assumes many simplifying assumptions).Jackson744 18:06, 7 March 2006 (UTC)
