18 Jun Efficiency vs. Justice: The Story of Juanita
More than 14 years ago, we met “Juanita” (the name is fictional, but the story is not), who shared a sad story with us. At that time, her family consisted of two children, herself, and her husband. The sad part of this story is that their first child had learning difficulties due to a tragic accident at birth—he fell headfirst. After the accident, Juanita didn’t tell her husband because she feared domestic violence, an even more harrowing reality. Fortunately, their second child did not face such challenges and had the same learning abilities as others.
She explained to us the dilemma that the family was facing at the time: with the income that she and her husband earned, they could only afford to send one child to a private school, under the assumption that private education is superior or at least more targeted. The family’s problem was clear: if they sent the first child to private school, perhaps private education would prepare him for life. However, if they would send the second child, he might make better use of the opportunities that a private education offers.
If you believe the first child should attend, you likely lean towards the justice of the action—this child was not at fault for his learning difficulties. On the other hand, if you think the second child should go, you might be prioritizing efficiency; only this second child might fully benefit from private education and could even help his older brother later in life. Perhaps.
When I use this example to explain the dilemma between justice and efficiency, valid comments often arise, such as: public education systems are often better; the real issue is that Juanita shouldn’t have to make this choice; the Goverment should take care of the first child; the economic system leaves people without enough money to solve these problems; the root problem is poverty, and so on.
All these critiques (and many more) are worth discussing in depth. However, the example effectively serves to illustrate a classic dichotomy in economics: justice versus efficiency.
While the initial example may seem specific and very “micro,” this trade-off is present in most economic problems faced by individuals and societies. Remember, dear reader, economics is a social science, and thus it has a genuine interest in issues affecting people.
It may seem efficient for each family to pay for the water they consume—but is it just for poor families to pay more because they often live in remote areas? It may seem just for everyone to receive a gasoline subsidy since all Bolivians are equal under the law—but is it efficient for wealthy families to receive it too? It may seem efficient within a family for each person to keep their own salary—but is it just for them not to help a sibling who is broke (even if he’s lazy)? It may seem just for taxes to be based on wealth, with the rich paying more than the poor—but is it efficient to take money/investment from the wealthy so that the poor can use it for consumption? It may seem just for all household members to share the house chores—but wouldn’t it be more efficient for each of us to focus on our strengths?
And remember, dear reader, there is no single, definitive answer to these questions. These issues are continually debated considering statistics, factual evidence, and basic and non-basic value judgments (concepts that deserve their own article). Economics is not an exact science because it is a social science. Mathematics, statistics, and econometric models are highly useful and necessary in the first part of the analysis, when describing reality. However, economists must use other tools when debating what is good (or what we believe is good) for society.
To conclude, let me share that Juanita sent her second child to private school. Because, dear reader, people with limited resources are remarkably efficient.
S. Mauricio Medinaceli Monrroy
La Paz
June 18th 2022
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