5MARKET FAILURE (3.4) Inequality

Transcription

1 MARKET FAILURE (3.4) 69 Inequality

2 70 MARKET FAILURE (3.4) BEFORE you start this unit (in pencil)... write the key idea of this unit in the centre of the page write what you know about this idea around it and draw lines to them. try and group the ideas together Mind-maps are very good revision tools. Our minds learn by making patterns. Mind-maps help you to make these patterns and so makes the content easier to learn and remember. mind-map AFTER you finish this unit (in pencil)... remove anything that doesn t belong to this unit ensure that things are grouped together appropriately. Move stuff around if needed add any extra ideas that you think are missing

3 MARKET FAILURE (3.4) unit overview 71 life s not fair Would the world be a better place if everyone earned the same income and had the same access to resources? On the one hand - yes. On the other hand - no. Markets require inequality to function effectively. For example if one good is more desired than another, then society wants firms in that market to earn higher profits. This sends a price signal to all producers to increase investment in that good. However, there s a difference between inequality and inequity. The first is about everyone getting the same outcomes (e.g. profit, income). The second is about everyone having the same opportunities. This unit looks at how the two differ, how they both affect markets, and policies that the Government can implement to ensure equity. by the end of this unit, you should be able to answer these questions... 1what s inequality and how does it lead to inequity? inequality 2 how do we measure inequality? 3 how can governments resolve inequality?

4 72 MARKET FAILURE (3.4) Study Notes Equity and Equality Achievement Standard 90631

5 MARKET FAILURE (3.4) 73 topic.1 inequality it s not fair! This topic looks at the difference between equity and equality... or inequity and inequality. It then looks at how we can use a Lorenz curve to graphically show the level of inequality in a country / economy. by the end of this topic, you should be able to... o describe the difference between equality and equity o explain why inequality can be good in markets and why inequity is not o use a Lorenz curve to measure / illustrate inequality in a country remember - try the exercises and then read the notes to learn what you don t know.

6 74 MARKET FAILURE (3.4) Exercise.1 Equity vs Equality Consider the following. 1. Indentify whether each of the following situations are examples of equity, equality, inequity or inequality. all five years can attend a state school free all teams in a competition score the same points anyone who can afford $ each year can attend a private school the top 200 year 13 students will be allowed into law school all retired people get free public transport on average lawyers earn $ more per annum than teachers 2. Explain how high inequality can lead to inequity. 3. When people die, they often leave an inheritance for their children. In this way families can build up wealth over time. Is this fair? Explain why this can be seen as both good and bad. 4. Complete equality is when all individuals earn the same income, and all firms earn the same profits. Explain why this would be inefficient in a market economy.

7 MARKET FAILURE (3.4) 7 Lorenz Curves are the most common measure of inequality in an economy. 1. Complete the table below and use the figures to draw Lorenz Curves for the imaginary countries and answer the questions that follow. COMPARATIVE NATIONAL INCOME DISTRIBUTION FIGURES FOR THREE COUNTRIES Percentage of National Income by Decile Decile Alphaland % of income Betaland % of income Gammaland % of income Cumulative Percentage of National Income Compared to Population Population Cumulative % Alphaland Cumulative % of income Betaland Cumulative % of income Gammaland Cumulative % of income E x e r c i s e. 2 L o r e n z C u r v e s 2. Which country has the most unequal distribution of income? 3. The New Zealand government has several methods of redistribution at its disposal to address the inequality problem. For any two of these methods, other than taxation, explain how they can be used.

8 76 MARKET FAILURE (3.4) Equity and Equality notes The last type of market failure we look at is inequity. Inequity, as we will see, differs to inequality and leads to the inefficient use of resources by society. Equity vs Equality Think of a running race (figure.1). Usually we ensure that all competitors start together so that they have the same chance of winning. That s equity, i.e. everyone has the same opportunity. However if we changed the start so that the slower people got a head start and everyone finished together, that s equality. Equality is when people get the same outcome. Equity is about opportunity and fairness. Equality is about outcomes. Inequity and inequality are the opposite, i.e. people not having the same opportunity (inequity) or people having different outcomes (inequality). EQUALITY All competitors finish together S T A R T Figure.1... Equity vs. Equality F I N I S H EQUITY All competitors start together Equity: Fairness... when everyone has the same opportunity. Equality: When everyone receives the same outcomes. What s Good About Inequality and Bad About Inequity? Inequality is not market failure. In fact we need inequality for markets to work. If all firms earned the same profit from making any good or service, there would be no incentive to make that goods and services that consumers most want. And there would be no incentive for workers to train for the jobs that are most needed by society. For example, why would people train for six years (with no income) to be a doctor when they could leave school and earn the same income as a checkout operator at the local supermarket? Inequality creates incentives that cause markets to work. Earning more (or less) profit from different products causes firms to allocate our scarce resources to producing the goods and services that consumers value the most (see figure 14.2 overleaf).

9 MARKET FAILURE (3.4) 77 Figure.2... Incentives and Resource Allocation $ MARKET FOR DESKTOP COMPUTERS $ MARKET FOR TABLET COMPUTERS S S P T P D P T P D Q D Q D D D Q Q T Q T D D Q Since the release of the first ipad, consumers have started to demand more 'tablet' computers which provide them with the features that they want. This has caused the demand for tablets to rise... and the demand for desktop computers to fall. Increased demand for tablets creates a shortage at P T which is resolved by firms raising the price to P T. This causes market output of tablets to rise to Q T. At the same time the fall in demand for desktops creates a surplus at P D. Firms will respond by dropping prices to sell their stock. So the price will fall to P D and market output will fall to Q D. The difference in the price of tablet and desktop computers, causes firms to switch their resources from the production of desktop computers (that consumers want less of) to producing tablet computers. Unequal prices have led to allocative efficiency. However inequity is market failure. It s not fair and it leads to a waste or resources. For example some poeple don t have as good access to education and healthcare as others. This means that they don t get the same chances to succeed and contribute to society. Assuming that poor people are just as intelligent and able as anyone else, failing to provide them with as good an education or healthcare is a waste of resources. And it s not fair. Inequality is not market failure. In fact inequality is a sign of market success. But too much inequality can lead to inequity. For example people on higher incomes can afford better education and healthcare for their families. This gives them (and their children) better chances to succeed in life and so creates inequity over time and generations. Using Lorenz Curves to Measure Inequality To measure inequality in a country, we use a Lorenz Curve. A Lorenz Curve records how what percentage of a country s total income each person earns, and then graphs this. The greater the bow in the curve, the greater inequality there is between the highest income earners and lowest income earners in a country. Figure 14.4 shows how a Lorenz Curve can be calculated and drawn. You will see that the graph also has a line of absolute equality. This is what the Lorenz curve would look like if everyone earned exactly the same income as each other. It helps us to analyse Lorenze Curves. The further away the curve is from the line of absolute equality, the greater the inequality in a country.

10 78 MARKET FAILURE (3.4) Figure.3... Creating Lorenz Curves % of Population % of Income Cumulative % of Population Cumulative % of Income 1 st 10% nd 10% rd 10% th 10% th 10% th 10% th 10% th 10% th 10% Last 10% A Lorenz Curve shows what percentage of total income is earned by various percentages of a country s population. Lorenz curves are created by dividing the population of a country (and the income they earn) into regular groups. These are then ranked from lowest income earners to highest. This is done in the left-hand table above. This table breaks the population up into deciles, i.e. groups of 10%. These percentages are then added together cumulatively. This is done in the right-hand table. This table shows that the poorest 10% of the population earn 1% of the total income and that the poorest 20% (including the first 10%) earn 2% of the total income and so on. This is then transferred to a graph that typically creates a curved line as shown to the right. % Income Line of Absolute Equality less inequality Lorenz Curve greater inequality % Population Limitations of Lorenz Curves Lorenz curves are a very useful and quick way of analysing inequality in a country, but they have some limitations, such as: Income vs. Wealth Lorenz curves measure income, not wealth. Someone who owns an expensive mansion and lives off their savings, but earns no income will seem poor on a Lorenz Curve. Over time people accumulate wealth, meaning that wealth is typically less evenly distributed than income. This can be even more so over generations as parents bequest their wealth to their children. Individual vs. Household Income Lorenz curves record individuals income, but people typically live in households where they share assets (e.g. house, car) and expenses (e.g. food). Lorenz curves do not take this into consideration. Stage of Live People have different incomes at different stages of their life, e.g. university student, young worker, retired person. Retired people usually have low incomes and high wealth which is held in assets such as their house or savings. On a Lorenz curve they show as poor regardless of their wealth..

11 MARKET FAILURE (3.4) 79 topic.2 government intervention: inequality one for all and all for one So if inequity is bad and long-term inequality leads to inequity... what can we do about it? This topic looks at some of the economic and social policies that governments can implement to reduce inequity in a country. by the end of this topic, you should be able to... o describe how the government uses taxes and transfer payments to improve equity o explain the concepts of horizontal and vertical equity o describe how collective provision of goods is an alternative solution to addressing inequity o evaluate the equity and efficiency of government interventions remember - try the exercises and then read the notes to learn what you don t know.

12 80 MARKET FAILURE (3.4) Exercise.3 Tax Attacks Calculate and discuss the tax issues in the questions below. 1. Why does the government collect taxes? 2. Use the marginal tax rates on page 7 to calculate the income tax payable by the following people: a. Reg earns $ per annum Tax Payable: $ b. Mere earns $ per annum Tax Payable: $ c. Phillipa earns $3 000 per annum Tax Payable: $ d. Zelda earns $ per annum Tax Payable: $ 3. For each of the people above, calculate their average tax rate. Write your answer in brackets alongside the dollar amount of tax. 4. Explain how your answers to (2.) and (3.) illustrate the principle of vertical equity.. Calculate the total tax paid by the following two individuals in dollar terms and as a percentage of their total income. Income: BEN THE BUILDER Income: DR. MURRAY Wages $7 000 Tax: PAYE $ GST $4 90 Fuel Excise Duty $940 Alcohol Excise Duty $100 Rates and Water $2 00 Total Tax Paid $ Wages $ Tax: PAYE $ GST $7 70 Fuel Excise Duty $1 200 Alcohol Excise Duty $200 Rates and Water $4 200 Total Tax Paid $ Average Tax Rate: % Average Tax Rate: %

13 MARKET FAILURE (3.4) 81 Tax cuts were finally introduced by the Labour Government in Read the following resources and answer the questions that follow. While personal tax cuts deliver meaningful tax savings, they have been delivered while meeting the Government s four tests, specifically personal tax cuts: Will not lead to greater inequality in our society. Have been designed not to exacerbate inflationary pressures in the economy. Will not require borrowing to fund them. Will not require cuts to public services. 1. Explain how personal tax cuts could lead to greater inequality in New Zealand? 2. Explain how the personal tax cuts referred to in the above resource might increase efficiency in the New Zealand economy? 3. Why could tax cuts lead to the government borrowing money to fund them? The Budget, Exercise.4 Tax Cuts and Government Spending 4. How could tax cuts lead to the inflationary pressures?. Rather than cutting personal tax rates, the government could have increased government spending. How could the government increase its spending to improve equity in New Zealand?

14 82 MARKET FAILURE (3.4) Exercise. Monopoly Imagine a game of monopoly. Imagine a game of Monopoly. At the start of the game, everyone is equal. All players are dealt the same money (wealth) to start with and all have the same opportunities (no properties are preowned). But soon, after a few rounds, one or two players start to gain an advantage over the other players. They earn more money with which to buy properties... from which they earn more money to buy more property, etc. 1. Why do you think the game is called Monopoly? The free market is similar, though of course infinitely more complex. It has the similar principle that the rules are (or at least should be) the same for everyone. The rules in Monopoly are fair but they allow, even facilitate, an unfair situation to develop between the players. So too the free market. 2. If the rules are fair, what economic principle is this an example of? 3. Are the rules the same for everyone in society? 4. Give one example of where the rules are the same for everyone and one example of where they are different. Though the rules of Monopoly are fair, the game is designed to have an unequal outcome. The goal is to be richer than your opponents. In society, inequality is allowed to occur but for different reasons. The chance to get ahead provides an incentive for people to perform better, to work harder. Inequality can be good for economic efficiency. However, prolonged inequality can eventually lead to inequity (not desirable).. People try to build up advantages to get ahead in society. Give two examples of such advantages. 6. Explain how prolonged inequality may lead to inequity? 7. How would you change the rules of Monopoly to stop an unequal outcome? 8. What mechanisms exist in society to make everyone more equal?

15 MARKET FAILURE (3.4) 83 Answer the multiple choice questions below: 1. A tax system where the marginal tax rate is zero on income up to and including $ and 20% on income greater than $ is... a. regressive. b. proportional. c. progressive. d. a lump sum tax. 2. Horizontal equity refers to the situation where... a. a country employs a progressive tax system. b. everyone pays the same proportion of tax, regardless of their income. c. everyone pays the same amount of tax, regardless of their income. d. people with the same amount of income pay the same amount of tax. 3. If the government were to raise the top tax rate for income earners, this would probably a. increase equity and have no effect on efficiency. b. reduce equity and have no effect on efficiency. c. increase equity but reduce efficiency. d. reduce equity but increase efficiency. 4. Equity concerns are not addressed through the government s... a. stabilisation role. b. allocative role. c. distributive role. d. regulatory role.. Which of the following statements is correct? a. Equality is a matter of fact and equity is a matter of opinion. b. Equity is a matter of fact and equality is a matter of opinion. c. More equitable means more efficient. d. More equal means less equitable. 6. Which of the following statements is most correct? a. The free market solution is always equitable. b. A progressive tax system aims for absolute equality of income. c. Equality has the same meaning as equity. d. The government intervenes in the market to increase equity. 7. Progressive taxes and the targeting of benefits are aimed at... a. increasing both equity and equality. b. increasing equity and decreasing equality. c. decreasing equity and increasing equality. d. decreasing both equity and equality. 8. The distribution of wealth is likely to be... a. the same as the distribution of income. b. less equal than the distribution of income. c. more equal than the distribution of income. d. made more equal by the abolition of capital gains taxes and inheritance duties. 9. Which of the following statements is true? a. Efficiency gains can only be achieved at the expense of equity losses. b. There is no efficiency-equity trade-off. c. Increased equity can only be achieved through increases in efficiency. d. Increased efficiency may sometimes result in a reduction in equity. 10. A Lorenz Curve which is a straight 4 degree line shows.. a. absolute equality of income. b. absolute inequality of income. c. a normal distribution of income. d. a very high degree of taxation within the country. Exercise.6 Inequity & Inequality

16 84 MARKET FAILURE (3.4) Government Intervention notes Why Does the Government Intervene to Minimise Inequity? While the government is happy with inequality as it provides incentives for markets to work, it does not like inequity... or inequality that leads to inequity, especially in the long-term. Reasons for this include: Social Reasons For social reasons, i.e. social justice, the government chooses to ensure everyone enjoys a basic standard of living or quality of life. This includes a minimum level of income and access to basic amenities (e.g. health-care, housing, education). Economic Reasons Because we choose to ensure that everyone has a minimum level of income, this creates a financial burden on the government, which taxpayers must support. This is expensive to the government. More importantly however, long-term inequality can lead to inequity. People on low incomes can often not afford as good an education as richer people, e.g. attend university to study medicine, law, engineering. This can mean they don t have an equal chance (equity) to get higher paying jobs. Therefore they earn less income and their children suffer the same fate. Given that poorer people are no less intelligent than richer people, it is not good for an economy that otherwise intelligent people are denied the opportunity to contribute to the economy as best they can. This is a waste of resources and so allocatively inefficient. The Distributive and Allocative Roles of Government In regards to inequity and inequality, the government has two types of policies distributive and allocative. Typically these exist to target inequity which may result from inequality. Distributive Role of Government This is where the government takes income or wealth from one group of people and transfers it to another group. Examples of the distributive role of government include: taxes benefits and other transfer payments targeted schemes (e.g. training subsidies) regional development Allocative Role of Government This is where the government provides a good or service directly to the public. Examples of the allocative role of government include: health-care education provision of infrastructure (e.g. roading) Government Intervention: Direct and Indirect Taxes Benjamin Franklin stated that in this world, nothing is certain but death and taxes. Taxes are a compulsory payment to government that the government needs to pay for the goods and services it provides. There are two main types of taxes that governments collect direct taxes and indirect taxes. Direct taxes are ones that are paid directly to the government by the person who owes the tax. Examples of direct taxes include PAYE and Company Tax. Indirect taxes are those taxes that are paid to the government via someone else, such as GST. Figure.4 summarises these two types of taxes. Tax: A compulsory payment to government.

17 MARKET FAILURE (3.4) 8 Figure.4... Direct vs. Indirect Taxes Direct Taxes Tax is paid by the individual straight to the government (e.g. PAYE, Company Tax, Fringe Benefit Tax). Indirect Taxes Tax is collected by a third party (e.g. shops, businesses) and then paid to the government (e.g. GST). Progressive vs. Regressive Taxes In New Zealand the central government charges individuals different tax rates depending on their income level. Table.1 shows the current tax brackets. Table.1: NEW ZEALAND PAYE TAX RATES Income Bracket $ Marginal Tax Rate % $ % $ % $ % Under this tax system, an individual s marginal tax rate (the amount of tax paid on the next dollar) rises as their level of income rises. Someone earning $ would pay a tax rate of 10.%, i.e. a total tax bill of $1 00. That person s aftertax income would be $8 90. A person earning $ would pay 10.% tax on their first $ of income and 17.% on her remaining $ That equates to a total tax bill of $2 20. Comparing these two people, the first person pays an average tax rate of 10.% ($1 00 $ = 10.%), while the second person pays an average tax rate of 12.6%. Under PAYE, both your marginal and average tax rates rise as you earn more income. PAYE is called a progressive tax. This compares to a regressive tax where the average tax rate falls as you earn more income. GST is an example of a regressive tax. As people earn more income, they spend proportionally less of their income. This means that though someone who is wealthier may pay more GST than someone with less income, as a proportion of his or her income (i.e. average tax rate) it will be lower. Figure.... Marginal and Average Tax Rate Tax Rate (%) Income ($) The graph above shows New Zealand s marginal and average tax rates as from 1st October The solid line shows the marginal tax rates and the dashed line shows the average tax rate. As can be seen, the average tax rate rises as an individual earns more income... but more gradually than the marginal tax rate.

18 86 MARKET FAILURE (3.4) Progressive Tax: A tax where a person s average tax rate rises as their income rises. Regressive Tax: A tax where a person s average tax rate falls as their income rises. Vertical and Horizontal Equity New Zealand s tax system is designed on the belief that people on higher incomes can afford to contribute more in the way of tax. This means that people are taxed on their ability to pay, while they receive benefits based on their needs. This is the concept of vertical equity. Horizontal equity is the notion that people should pay the same amount of tax regardless of how they earn their income. Whether you earn income from buying and selling houses (capital gains), by trading shares, get paid in cash or get paid with a free car and accommodation, you should pay the same marginal tax rate. This is the reason for fringe benefit tax. Vertical Equity: The belief that people on higher incomes should pay a higher tax rate because they are more able to afford it. Horizontal Equity: A belief that people should pay the same marginal tax rate on their income regardless of how they earn it. Government Intervention: Transfer Payments The government can reduce extreme inequity by providing welfare payments to individuals, e.g. the unemployment benefit, sickness benefit, etc. Government Intervention: Allocation The government also provides certain goods and services such as healthcare and education to all New Zealanders to ensure that all households and individuals have equitable access to healthcare.

19 MARKET FAILURE (3.4) 87 Government Interventions - Equitable and Efficient? The Leaky Bucket Problem A social welfare system, where the government takes income from one group and distributes it to others either directly in the form of cash or indirectly through the provision of goods and services will create inefficiencies. These inefficiencies are sometimes referred to as the Leaky Bucket problem, i.e. not all of the money collected from the wealthy makes it into the hands of the beneficiaries. Inefficiencies of a welfare system include: Cost of Administration To run a welfare system, the government must operate an organisation to collect the tax (Inland Revenue Department) and one to disburse it. This costs the economy. Reduced Incentives for Income Earners Any progressive tax is going to reduce the incentive to workers to earn a higher wage. Workers may choose not to seek higher paid jobs or work overtime because their extra income is reduced by taxes. Reduced Incentives for Private Producers When the government chooses to provide goods and services such as housing, health-care and education, the government is taking over the job that private firms would produce. As we ve seen, this is done because private firms may provide insufficient quantity at too high a price. Nevertheless the government is reducing business opportunities for private firms. Increased Dependency People on the benefit or earning close to the minimum wage may choose to stay on the benefit, rather than actively seeking work. This reduces the productivity of the labour force. Poor Figure.6... The Leaky Bucket Rich The Leaky Bucket problem refers to the inefficiencies of any government programme that attempts to redistribute income. Administration costs, reduced incentives for workers, etc. mean that some of the income collected from taxpayers will not make it to the beneficiaries of the scheme. For these reasons and others, the government must always consider the trade-off between improving equity in the country and affecting the allocative efficiency of the economy. Sales taxes, welfare systems, provision of goods and service may well improve equity (and equality) in New Zealand but they can reduce the efficiency of the economy. Equity Figure.7... Equity vs. Efficiency Trade-off Efficiency A Efficiency B Equity All government policies must balance the need to promote allocative efficiency and increasing equity in society. At times, the two objectives are in conflict with each other.

20 88 MARKET FAILURE (3.4) UNIT Unit Content: Inequality.1 Describe and Show Inequality Equity vs Equality What s Good About Inequality and Bad About Inequity? Using Lorenz Curves to Measure Inequality Limitations of Lorenz Curves.2 Government Intervention: Inequity Why Does the Government Intervene to Minimise Inequity? The Distributive and Allocative Roles of Government Government Intervention: Direct and Indirect Taxes Progressive and Regressive Taxes 1 (poor) Understanding 2 3 (good) Vertical and Horizontal Equity Government Intervention: Transfer Payments Government Intervention: Allocation Government Intervention - Equitable and Efficient? checklist: I have... done a mind-map of the main ideas (before and after I ve done the work) tried (and marked) all of the exercises watched the online videos of this work read the notes and summarised the key ideas in the margins of the pages made (or downloaded from quizlet) flashcards of the key ideas and definitions relevant current events and examples: relevant events and examples for this unit are: I didn t really get the following parts of this unit and I m going to ask to help me with this

21 MARKET FAILURE (3.4) 89 tips 4 assignments This standard is internally assessed, and so you may be required to do an assignment. If you do, follow the guidelines below to help you learn the material and get the grade (excellence) that you deserve. clarify what you need to do Read the assignment task carefully AND the marking schedule to see what you must hand in to achieve this standard. Check whether you must hand in... original data? graphs and/or diagrams? a typed essay or a video podcast? Talk to your teacher about this. Check your understanding with other students in your class. check when you need to do the work Most assignments have a number of deadlines. These may include: initial hypothesis / proposal first (or final) draft final assignment The early deadlines are a chance to check with your teacher that you re on the right track... so use them. Even if you don t think you ve got it right, ALWAYS hand something in to get feedback. ask questions You may need to gather some data or information, and some theory. AT THE START... think about what information you will need. Who will you ask, or where will you read for this information? What questions will you ask? If you get this part of the assignment right at the start, the rest will be much easier. set a timeline... and stick to it! Draw a timeline of what you need to do - by when. Put this into your diary... your cellphone... on your bedroom roof... wherever you re going to see it - and do something about it! Don t... don t... just don t leave it all until two nights before the final hand-in (submission) date. final check Try to finish early (two weeks is ideal). Then put your assignment aside and don t look at it for a few days. Then read it right through and check that (1) it makes sense and (2) meets the assessment criteria. NOW GET GOING!

22 90 MARKET FAILURE (3.4) tips 4 teachers number of concepts There are four types of externalities listed in the standard: externalities of production and consumption public goods imperfect information inequitable income distribution You must assess at least two of these. (i.e. market dominance and abuse) Note: merit and demerit goods are not direcly mentioned, however I have included them as part of externalities where they seem to belong best. Any analysis of merit or demerit goods must put them in the context of externalities, or possibly public goods. style of assessment You can assess this standard in a variety of ways: test(s) portfolio of work assignment The important thing is that you can provide evidence of students understanding of two or more micro-economic concepts... as per the standard. data / information The standard does NOT REQUIRE students to use data or information with their analysis... though this may be a logical thing to include, e.g. if calculating a Lorenz Curve, or to compare the equity of policies. If students do collect data, it should be genuine and relevant data. In this situation, students should provide a bibliography so that you can check the validity of the data (and help them learn this skill for further study). However, a bibiliogaphy is not a requirement of the standard. achievement criteria achieve Students must use theory (i.e. models such as graphs) to explain two or more market failures and a government intervention to address each failure... and evaluate the government policy with regard to equity and efficiency. achieve with merit Students understanding must be at a higher level ( in-depth ) than for an achieved grade. achieve with excellence Same as merit... AND Students make a justified recommendation for the best government intervention based on equity OR equality.

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