Simple Equality of Equity
The simple equality of equity is an economic theory of income distribution that states that, when all types of income are distributed in equal proportions, it leads to greater economic efficiency and, therefore, a more prosperous economy. This theory has been around since the 19th century and was initially developed by economists Alfred Marshall and William Stanley Jevons. The idea of this principle is that, if people’s incomes are divided into equal shares, then each person will have an incentive to work harder and produce a greater amount of goods – thus leading to an improved economy overall.
In simple terms, the basic premise of simple equality of equity is that, when all people receive the same amount of money, there will be fewer incentives for them to work hard and produce a larger amount of goods and services. This is because, if all people receive the same amount of income, then there is essentially no incentive to produce more than is necessary. Thus, the economy runs the risk of becoming uncompetitive and stagnant.
To illustrate how this works, let’s assume that five people are given the same amount of income. Those five people will likely all purchase the same amount of goods and services, which means that the economy would suffer from a lack of competition and price stability. This would lead to an increased cost of living, as there would be no incentive for companies to keep their prices low or increase their production rate.
However, under the theory of simple equality of equity, income is divided into unequal shares, so that each person receives a share based on his or her productivity and contribution to the economy. Therefore, this would lead to greater competition and price stability, as well as an improved economy overall. In this case, each person is incentivised to produce more because he or she will receive a larger share of the income.
The simple equality of equity is often used as an argument against government welfare programs. This is because welfare programs often have the consequence of creating an environment of dependency, where people rely on the government for their income instead of working for it. Thus, under the simple equality of equity, it would be argued that individuals should be incentivised to work and produce a greater amount in order to gain a larger share of the income distribution, instead of relying on government subsidies.
Proponents of this theory also argue that it has the potential to reduce inequality in society, as those who contribute more in terms of productivity and economic output would receive the greater share of the income. This, in turn, would reduce poverty and improve prosperity among all members of the population.
There are, however, some drawbacks to this theory. Critics argue that, while it may promote economic efficiency, it fails to take into account other factors, such as skills and talents, which could affect an individual’s ability to produce more. Additionally, some believe that it ignores the role of government intervention, which can help to ensure a more equitable distribution of wealth.
Overall, the concept of simple equality of equity is an interesting economic theory that has been around for nearly two centuries. Its underlying premise is that, if all people receive an equal share of income, it will lead to greater economic efficiency and a more prosperous economy. However, there are both proponents and critics of this theory and it is important to remember that it does not take into account all factors which contribute to an improved economy.
