Efficiency and Equity

Economists are generally concerned with efficient markets. The issue that is rarely addressed is equity within markets. That is to say, equity in the form of the allocation of resources or income distributions. It might surprise you that economists are seldom interested in equity. Equity is a normative concept that relies on value judgements. Efficiency is a positive concept with clearly defined properties. It is important to remember that economists, when forming policy, are not concerned with equitable distributions. This is a major reason economists favor policies like free trade, because free trade promotes efficiency. The problem then lies in determining the distributional consequences of a free trade scheme.