Question

Which set of policies is more likely to cause a tradeoff between economic output and equality: policies of redistribution or policies aimed at the ladder of opportunity? Explain how the production possibility frontier tradeoff between economic equality and output might look in each case.

Short answer

Policies of redistribution will cause a complete tradeoff and hence a downward sloping PPF.

Policies aimed at the ladder of opportunity would face a PPF which is more rising, then flat, and later falls.

Step-by-step solution

Step1. Introduction

In order to promote equality, two sets of policies are possible.

One is to aim at redistribution, i.e. redistribute the assets from rich to the poor.

Second is through the ladder of opportunity, i.e. by providing them with equal and ample number of opportunities to come out of the trap.

Step2. Explanation

Policies aiming at complete redistribution are the ones which shall face a trade off between whether to enhance economic output or to promote equality.

The PPF in such case between economic output and equality shall be strictly downward sloping.

In case of policies aiming at ladder of opportunity, the PPF will be more like an upward rising, followed by a flat phase and then strictly declining. Hence, through such policies we can if not increase the output, at least restrict it from falling.