Equity-Efficiency Tradeoff

An equity-efficiency tradeoff results when maximizing the productive efficiency of a market leads to a reduction in its equity—as in how equitably its wealth is distributed. The debate around the tradeoff often focuses on addressing growing economic inequality within a country or region where the economy and GDP are growing. The concern for some is that the least affluent members of society receive a disproportionately small share of the increasing wealth. Academic discussion of equity-efficiency revolves in part around whether equity and efficiency are always inversely related or whether they can both rise at once.