In welfare economics, distributive efficiency occurs when goods and services are received by those who have the greatest need for them. Abba Lerner first proposed the idea of distributive efficiency in his 1944 book The Economics of Control. Welfare economics is a branch of economics that uses microeconomic techniques to simultaneously determine the allocational efficiency of a macroeconomy and the income distribution consequences associated with it. ... ...

The Law of Diminishing Marginal Utility

According to this economic "law", as a person gets more to spend, he will buy things that give him less and less utility. For example, if a person is given a gift certificate for a CD in a music store, he will use the gift certificate to purchase the CD he will enjoy the most. If he is given another, we will buy his second favorite CD, and so on. The process continues and the man keeps getting certifactes for CDs. Each additional CD the person buys is slightly less desirable than the one before. In the end the person, having all the CDs he likes, will take CDs that he does not really like at all.

Diminishing Utility and Society

Lerner applied the concept of utility and its associated "law of marginal utility" to the distribution of income in society. The law of diminishing marginal utility implies that poorer people will gain more utility from money for additional spending than the wealthy. For instance, if a homeless family is given a gift certificate for a house, they will be able to use it to provide shelter for themselves. If a very rich person is given such a gift, he may spend it on a vacation residence which he will only use a few weeks of the year. In [economics]], utility is a measure of the happiness or satisfaction gained consuming good and services. ... In economics, marginalism is the theory that economic value results from marginal utility and marginal cost (the marginal concepts). ...

As such, aggregated utility would be maximized by taking wealth from the rich and giving it to the poor, and the state of optimized utility would be economic equality. As Lerner puts it, "If it is desired to maximize the total satisfaction of a society, the rational procedure is to divide income on an equalitarian basis" (Lerner, 32). However, redistribution of income can stiffle economic growth and development. Knowing this, Lerner qualified his earlier statement: "The principle of equality would have to compromise with the principle of providing such incentives as would increase the total of income available to be divided” (Lerner, 36). Economic inequality refers to disparities in the distribution of economic assets and income. ...

Crticisms of Utility's Relevance

Different value systems have different perspectives on the use of utility in making moral judgments. For example, Marxists, Kantians, and certain libertarians (such as Robert Nozick) all believe utility to be irrelevant as a moral standard or at least not as important as others such as natural rights. Distributive justice does not have much importance to those who do not agree with utilitarianism's moral framework. Marxism is the political practice and social theory based on the works of Karl Marx, a 19th century philosopher, economist, journalist, and revolutionary, along with Friedrich Engels. ... Immanuel Kant Immanuel Kant (April 22, 1724 – February 12, 1804) was a Prussian philosopher, generally regarded as one of Europes most influential thinkers and the last major philosopher of the Enlightenment. ... This article deals with the libertarianism as defined in America and several other nations. ... Robert Nozick (November 16, 1938 – January 23, 2002) was an American philosopher and Pellegrino University Professor at Harvard University. ... ...

References

• Friedman, Milton. "Lerner on the Economics of Control." The Journal of Political Economy, Vol. 55, No. 5. (Oct., 1947), pp. 405-416.
• Lerner, Abba P. The Economics of Control. New York: Macmillan Co., 1944.