Equity

Statement

Equity is the fair distribution of economic welfare. Inequity is the absence of such fairness — typically, the inability of lower-income consumers to obtain essential goods and services such as education and healthcare, despite being willing to consume them.

Notes

Equity is a normative concept: whether a good counts as “essential”, and what counts as a “fair” distribution, are value judgements — petrol is treated as an essential, subsidised good in Indonesia but not in Singapore. Equity is distinct from efficiency: a market can allocate resources efficiently and still produce an inequitable outcome, because the market responds to willingness and ability to pay, and the poor lack the “economic votes” to register their needs. The mechanism by which the market under-serves low-income households, and the redistributive policies that respond to it, are set out in inequity.