ECON 2010 Lecture Notes - Lecture 33: Basic Income, Deadweight Loss, Distribution Of Wealth
10 Dec 2016
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Wealth distribution removes incentives to work, which causes dead weight loss. Economists agree that there must be some level of government programs because of decreasing marginal utility of wealth. Decreasing marginal utility means that money means significantly more to a poor person than a rich person. Minimum wage reallocates resources from the rich to the poor. Price floors (minimum wage) increase producer surplus, decreases consumer surplus, and increases dead weight loss. Pros of (cid:373)i(cid:374) (cid:449)age: mi(cid:374)i(cid:373)u(cid:373) (cid:449)age (cid:272)a(cid:374) fi(cid:454) (cid:373)arket failures, fi(cid:454)es (cid:373)o(cid:374)opso(cid:374)(cid:455)"s, a(cid:374)d prote(cid:272)ts caretakers. Cons of min wage: firms may treat employees worse, and potential for discrimination increases. Universal basic income eliminates all social services and give every citizen an unconditional transfer (a sum of money). Bill gates would make the same amount as a homeless man. Pros: ubis have no substitution effect and would be incredibly simple to implement.
