Introduction

Abstract

As emphasised in the title of Okun’s (1975) book, efficiency versus equality is the big tradeoff in public policy. It is probably the most important problem in the foundation of public economic policy. It appears in almost all fields of public economic policy. Yet, according to my argument explained in this book, it should basically only be confined to one area of public policy — the general tax/transfer system — though it remains an important problem. In all other areas, efficiency (the principle of ‘a dollar is a dollar’) should be allowed exclusive reign. This provides the most efficient method of achieving whatever degree of equality is aimed at, or whatever value of tradeoff allowed for. If accepted, my proposal leads to a tremendous simplification in the formulation of public policy in general and in cost-benefit analysis in particular. Thus, no economist, at least no economist concerned with policy issues, can afford to ignore this argument.