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Comparing Economic Outcomes: Evaluating Systems for Optimal Growth and Equity

This study delves into the impact of economic systems on outcomes and how to evaluate their performance. It explores criteria like economic growth, efficiency, equity, stability, and viability, shedding light on the complexities of comparing economic outcomes across different systems. The analysis considers the challenges of maximizing economic outcomes while balancing environmental factors, system constraints, and policies. The criteria examined include income distribution, resource sustainability, and the implications of inequality and business cycles. The study raises thought-provoking questions about the feasibility of pursuing all economic goals simultaneously and points out the limitations of using GDP per capita as a sole measure for comparison.

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Comparing Economic Outcomes: Evaluating Systems for Optimal Growth and Equity

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  1. Ohio Wesleyan University Goran Skosples 3. Comparing Economic Outcomes 0

  2. 0 • How does an economic system impact economic outcome? • How do we evaluate performance of an economic system?

  3. Economic Outcomes 0 • What is an economic outcome? Name few. • In general, several inputs are combined to achieve the final output • Inputs: • environmental factors • economic systems • policies • Output: • economic outcome

  4. Outcome Evaluation • Objective: maximize economic outcome given the constraints imposed by the environmental factors, the economic system, and policies. • Then, it is simple to compare economic outcomes across different economic systems – a system with the maximum economic outcome performs the best • Or, is this the end of the story? Can you think of any problems with this analysis?

  5. Outcome Evaluation • Criteria: • economic growth • efficiency • income distribution (equity) • stability (business cycle) • viability of the ES

  6. 1. Growth • increase in the volume of real output • output  GDP per capita (most commonly used) • Human Development Index (life expectancy, infant mortality, literacy, nutrition…) highly correlated to GDP per capita. • problems in using GDP per capita for comparison?

  7. 2. Efficiency • captures _____________ of an economy  compares the actual output to the maximum possible output given inputs. • _____ efficiency: how could the existing resources be reallocated to increase current output? • _______ efficiency: is the long-run value of output being maximized? • intensive vs. extensive growth • The problem of _________________!!!

  8. 1 Cumulative share of total income 0 Quantiles 5 3. Equity (inequality) • distribution of wealth, income and opportunity • ________ curve and the ____ coefficient =

  9. 4. Stability • no significant negative ___________ fluctuations • business cycle  what is affected? 5. Viability • can the system __________? • is the economic system ___________? • is it sustainable in the use of its natural resources? (_____________ sustainability) Is this list of criteria exhaustive? Can a country pursue all goals simultaneously?

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