Efficiency and Equity in a Socially Embedded Economy

58 Pages Posted: 9 Aug 2021 Last revised: 4 Apr 2022

See all articles by Marc Fleurbaey

Marc Fleurbaey

Paris School of Economics

Ravi Kanbur

Cornell University; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Dennis Snower

Global Solutions Initiative Foundation GmbH

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Date Written: August 7, 2021

Abstract

A model that only focuses on economic relations, and in which efficiency and equity are defined in terms of resource allocation may miss an important part of the picture. We propose a canonical extension of the standard general equilibrium model that embeds economic activities in a larger game of social interactions. Such a model combines general equilibrium effects with social multiplier effects and considerably enriches the analysis of efficiency and equity. Efficiency involves coordination between economic and social interactions, may depend on social norms, and may strongly interact with the distribution of resources. Equity can be defined in a comprehensive, socioeconomic way, and a decomposition into an economic and a social component is possible.

Keywords: social interactions, efficiency, equity

JEL Classification: A13, D50, D60

Suggested Citation

Fleurbaey, Marc and Kanbur, Ravi and Snower, Dennis, Efficiency and Equity in a Socially Embedded Economy (August 7, 2021). Available at SSRN: https://ssrn.com/abstract=3900962 or http://dx.doi.org/10.2139/ssrn.3900962

Marc Fleurbaey (Contact Author)

Paris School of Economics ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Ravi Kanbur

Cornell University ( email )

301-J Warren Hall
Ithaca, NY 14853
United States
607-255-7966 (Phone)
607-255-9984 (Fax)

HOME PAGE: http://www.kanbur.dyson.cornell.edu

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Dennis Snower

Global Solutions Initiative Foundation GmbH ( email )

Friedrichstraße 194 – 199
Berlin, 10117
Germany

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