Not long ago, economists argued in public over basic economic policy issues. Foremost among the debates was the clash over equity and efficiency. Efficiency promotes economic growth and overall prosperity. Equity deals with how much of people’s income should be shifted to the less fortunate. Generally, more equity risks less efficiency, hence the so-called equity-versus-efficiency tradeoff that economists often debate. Welfare transfers that provide a “hand up” can improve efficiency, but “handouts” might encourage unemployment. The taxes needed to pay for welfare transfers by themselves also generate distortions ... (full story)