Answer to Question #65446 in Economics for Charne

Question

when goverment redistributes income with taxes and welfare, does the economy become more efficient or not?

Answer 1

If we are talking about “efficient” as maximizing production of goods using standard economic theory, then this statement is false.
This is because economist deny the possibility to measure utility and so use the standard of maximizing production. However, people's instinct is to use the first.
Such a difference in point of view lies at the heart of the political debate about economic policy.