A candidate for public office has proposed a program of wealth transfers based on the principles of utilitarianism. In support of her proposal, she makes the following statements:
Statement 1: “Increasing taxes on high income earners will cause them to work more hours to maintain their after-tax income, resulting in greater economic output.”
Statement 2: “The government will need to hire people to manage and administer the wealth transfers. These new jobs will further expand economic output.”
With respect to these statements:
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Both statements are incorrect. Increasing taxes on high income earners reduces their incentive to work, which results in less labor being supplied and lower economic output. The labor needed to administer wealth transfers must be diverted from other uses that provide value to consumers. This moves resources away from a productive use, which reduces economic output.
Which of the following is least likely to be considered a drawback of utilitarianism?
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The biggest problem with the utilitarian concept is that the wealth transfer from high income earners to low income earners is brought about by taxing the high income earners. This will cause the high income earners to work less.
The symmetry principle refers to the idea that if an economy is organized under a fair set of rules:
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The symmetry principle asserts that under a fair set of rules, the goods and services that individuals receive from the economy will be equal in value to the contributions they make to the economy.
Which of the following economic schools of thought suggests that the greatest good occurs to the greatest number of people when wealth is transferred from the rich to the poor?
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Utilitarianism refers to the idea that the greatest good occurs to the greatest number of people when wealth is transferred from the rich to the poor in order to make everyone’s wealth equal.
Which of the following most accurately reflects the concept that competitive markets allocate resources fairly as long as the same rules apply to all participants?
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The symmetry principle holds that people in similar situations should be treated similarly. It implies that the market allocates resources fairly if the rules of economic allocation are fair.
The symmetry principle holds that:
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The symmetry principle holds that people in similar situations should be treated similarly and that fairness requires equality of opportunity rather than equality of results. Individuals provide voluntary services in exchange for economic benefit and they get goods and services from the economy that are equal in value to their contributions to the economy.
Which of the following is least likely consistent with utilitarianism?
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Proponents of utilitarianism argue that the marginal benefit of a dollar is greater for the poor than the rich, so the gain in marginal benefit to the poor from the transfer of wealth is greater than the loss of marginal benefit to the rich. All of the other statements are consistent with utilitarianism.
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