Economics

Equity and Equality

"Equality describes situations where economic outcomes are similar for different people or different social groups."

This is how IB defines Equality

(Syllabus, first exams 2022).

The IBO defines Equity in the new syllabus by first comparing equity to what it is not:

"In contrast to equality,...

equity refers to the concept or idea of fairness."

But what is "fairness"?

Fairness is a normative concept meaning it is something that is arguable rather than definable or measurable.

Therefore, what is equitable, or fair, is a debated concept. It cannot be objectively measured.

Here is an example:

The GDP of China is US$12.24 Trillion.

The GDP of Andorra is US$3.03 Billion.

These figures are definitive, they can be checked.

But, what about this statement:

People in China are better off than the people in Andorra.

This statement is debatable because "better off" is not the same thing as "Higher GDP." To prove this statement we would have to define "better off" and make an argument built logically from additional positive economic statements.

Andorra has a much smaller population (positive statement - we can check)

Andorra's GDP per capita (GDP divided by the population) is about US$39,150 while China's GDP per capita is only US$ 8,830.

But does this prove that "people in Andorra are 'better off' than people in China"?

No.

It only proves that the GDP per capita is higher. GDP per capita is not equal to "better off."

There are a lot of other factors that one might consider:

What is cost of living?

Are prices stable?

What is the healthcare system like?

What is the education system like?

Is the GDP per capita increasing over the last several years or decreasing?

So how does one prove that people in Andorra are, or are not, "better off" than people in China?

You cannot.

All you can do with a normative statement is make an argument, a thesis, and then defend that thesis with evidence.

Therefore,

if "equity refers to the concept or idea of fairness," and "fairness is a normative concept," then

what is equitable is not something that can be definitively measured.

So what is equity?

We have still not answered this question.

All we have said is that equity is not equality.

Equity is a term used to refer to the distribution of resources in an unequal manner such that

those with more need receive more resources.

Of course, this is a normative concept because "the amount of need" must be defined.

Who gets to define who "has the most need" and who "has the most ability"?

To create more equity, society must answer those questions:

What exactly is "need"?

Who determines "need"?

What policies and procedures should be used to determine need?

What policies and procedures should be used distribute resources equitably?

A classic example of equity is as follows:

"From each according to his ability, to each according to his needs" --Karl Marx, 1875 Critique of the Gotha Program

D

In the equality image

resources are distributed equally

Everyone gets the same resources to see the game.

In the equity image

resources are distributed based on needs

Everyone gets to see the game from the same view.

Often when discussing equity, people will say that the equitable picture is more "fair."

It is true that they all see the game from the same vantage point (fairness)

but it is only "fair" if one defines fairness in the outcome (e.g. seeing the game from the same vantage point) because, as we illustrated above,

"fairness is a normative concept."

One issue with the metaphor is that height can be measured, so can the wall, so can the box.

But "fairness" or Equity is a normative concept and is something that has different meanings for different people.

Equality of Outcome versus Equality of Opportunity

If the opportunity is to watch the game, learn from it, use it to further one's self,

then equality "which is when outcomes are similar" (IB syllabus for 2022) results in equal "outcome" as each person is raised the height of one box.

Equity, however, results in each person having the opportunity to see the game, learn from it, and use it to further one's self.

This is why it is often said that equity leads to equality.

However, in the metaphorical picture, height is something that can be measured, so is the fence, so is the box. Therefore, the picture somewhat misrepresents the concept, because everything in the picture can be measured and adjusted with certainty. This contradicts one of the fundamental elements of equity discussed above --

Equity is a normative concept.

How do economic students think

about this this stuff?

They ask questions?

It's a metaphor...

What do the boxes represent

(remember resources are finite)?

What is the fence (rather than taking resources,

(could the systemic problem be addressed)?

What is height?

(It is easy to determine that the short person requires a box,

but how does this translate the real world)?

What does "seeing the game" represent?

(Is seeing the game the opportunity or the outcome)?

Who is doing the "giving" of the resources

(is this something that the market could work out (FYI- it won't)?

Is it something that requires government intervention?

How much intervention? Will the intervention impact the market)?

What if the tall person is still taller? Would they dig a hole?

Do other metaphors work better?

How about a race,

some get a head start, and others get a bicycle.

Is the goal to start everyone evenly

or is the goal for everyone to finish at the same time?

What is the start line?

What is the finish line?

What is the bicycle?

Who decides?

If a person is really fast, does he have to wear weights? What are the weights?

Who gets to decide what is a "fair" starting position?

Equality can be measured.

Equity can be debated.

As one of the themes of economics, EQUITY, is a goal. But what exactly is defined as equitable is the subject of debate.

The reason this can be difficult is because people often to not define what is the opportunity and what is the outcome. The image allows one to draw one's own conclusions, and debates often result from misrepresentations of the metaphor.