Malthus: productivity grows in a linear way. Population grows exponentially. B: population growth outpaces productivity growth. That’s when famine comes in place, people fight over food etc. So after a while, population goes down again, until pop. growth equals productivity growth (C). But when Malthus (a philosopher) came up with this, it was just before the industrial revolution. Population increased quicker than productivity. The land reforms passed in the UK, who in the beginning fostered prod. growth but esp. pop. growth would eventually lead to the industrial revolution. That prod. growth was that important, that the Malthus effect never really occurred in the UK.

Carlyle: a philosopher who coined the term ‘the Dismal Science’ (dismal as opposed to gay).
If the Malthus effect were true, then increasing productivity, efficiency, would be a moral duty. One view: efficiency is all we should worry about. Other people will say that growth is not a moral duty, but redistribution, solidarity is. Why?
-Darwinian evolutionary argument: it fosters the growth of human population quicker. This is what the Left in America uses as an argument.
-there’s no level playing field/opportunities
-religious argument?
-insurance mechanism (bad luck): but this only works if you work in group. We want to insure ourselves against bad luck.
-hedonistic welfare argument: people feel better when they don’t see other people suffer. People care about each other.

Efficiency or solidarity? Brian says it’s not the job of the economist to make that choice. It’s the policy maker’s choice.
Why is it a trade-off?
-Moral hazard --> especially important for people in the insurance business. People are less inclined to be careful if they’re insured than if they’re not. In Belgium, there are some situations in which an unemployed person earns more on unemployment wage than the same person working on a minimum wage.
-insurance is not free. The tax on value added is the same for everyone, doesn’t differentiate between rich and less rich people. When people are taxed on their income, there’s proportionality (10% for someone who earns 10000 dollars is proportionally the same, but in absolute terms less than 10% for someone who earns 3000 dollars). Plus, there’s Marginal tax rates: somebody who earns 1000 dollars will pay 0 dollars, because society will see that as too poor to take part in it. Someone who earns 10000 will pay 35% on the first 3000 they make, 45% on everything they earn between 3000 and 6000, and 55% on anything more than 6000. Taxes: 4600 dollars. Average tax rate: 46%.
-economic incentives. The person in the example won’t be really inclined to make more than 6000. Mankiw wrote an opinion piece saying that everything he makes above 100.000 or so per year was taxed at a 90% rate (but took succession rights etc. in account to). Created a controversy. Doesn’t push him to work more.

Kuznets: in the beginning, when there’s economic growth, inequality, the gap, increases. Until at a certain point — China is probably almost there —you get a tipping point, and inequality starts to diminish until it reaches an acceptable level. It’s often a political choice, at what level you want to start to redistribute. Laffer. Famous republican economist. The more you tax, the bigger govt. revenues will be. But at a certain point, people will be fed up with giving govt. their money, so they’ll start doing things behind the back of the govt. But where’s that tipping point? 30%? 50%? In America: between 65-87%.

Production function: the maximum production a society can hope to create (it’s a circle, with possible production points). Cf. graph. Say in the US, the rich make more than the poor. Wealth is not equally distributed. Say Obama gets reelected, and makes equality a major objective. USA*. But to do so, he’s going to start taking from the rich. But he realizes, when he takes from the rich, his cake becomes smaller. He didn’t manage to take as much as he wanted ‘cause his economy has shrunk. His new objective is USA**. Very quickly, he’ll have realized that the economy has shrunk even more. Society will be more equal than it used to be.