An old nursery rhyme begins: "Jack Sprat could eat no fat, and his wife could eat no lean." What does the concept of efficiency say about this situation?
Nothing, because it is dynamic not static. Nothing, because they will be envious of one another. That when both are given identical portions of steak, we have an efficient distribution. That when both are given identical portions of steak, we have exchange inefficiency.
In Europe government regulations discourage consumer credit. "It's to protect the consumer from himself," says Jacques Zeegers, secretary general to the Belgian Banking Association. Mr. Zeegers position is consistent with a belief that:
sometimes people are not rational so we should not always trust economic efficiency. sometimes people are not rational so we should not always trust economic equity. markets may be unfair even if they are efficient. producers should determine what gets produced, not consumers.
