ABSTRACT
It is commonly asserted that there is, or that in most situations there is likely to be, a trade-off between equity and efficiency. That is, the implementation of a policy measure designed to ‘increase’ one may result in a ‘decrease’ in the other. For example, a social security system that reduces poverty, thus promoting greater equity under most interpretations of that term, may also reduce individuals’ incentives to work or to save, thus creating inefficiency-at least under some interpretations of that term. Another example might be selective education, accused by some of being ultimately incompatible with equality of educational opportunity and thus with equity, but advocated by others as promoting ‘excellence’, and hence efficiency. Yet another case might be a health care programme on the dangers of smoking that increased the average life-expectancy of all groups in the population, thus promoting efficiency, but produced a greater increase in life-expectancy for the betteroff (who, for various reasons, were more responsive to the message) than for the poor, thus increasing the gap between these groups and arguably increasing inequity.
