Explain Deadweight Loss and describe how does it affects economic growth?

2013-09-13 1:52 am
Any help please my text book is very confusing and I do not know how to answer this.

回答 (2)

2013-09-13 3:16 pm
✔ 最佳答案
In simplest explanation without numbers and graphs...
At equilibrium, the total surplus is maximized and contains both producer surplus and consumer surplus. Any deviation from equilibrium causes changes in PSP and CSP in such way that total surplus is reduced so the difference between total surplus at any point awau from equilibrium and the total surplus at equilibrium is called deadweight loss.
By subsidies and taxation, equilibrium changes and so do surpluses but the difference from that at equilibrium now goes back to society through government so that cannot be called deadweight loss.
2013-09-13 12:07 pm
There is no connection.

"deadweight loss" is an extremely misleading micro-economics term
http://en.wikipedia.org/wiki/Deadweight_loss
some argue that it shouldn't be used in teaching economics.
http://www.voxeu.org/article/removing-deadweight-loss-economic-discourse-income-taxation-and-public-spending

Economic growth is a macro-economics issue. Micro-economics has little to say about growth that is in any way meaningful.

For example, micro considers taxes to be deadweight loss, but without taxes the government can't educate the populace, invest in infrastructure, etc. And those investments promote economic growth.

For another example, micro considers tariffs and quotas to generate deadweight loss. But no country has ever developed without protecting its infant industries
http://www.paecon.net/PAEtexts/Chang1.htm
Is that accidental or causal?

Culture and "social capital" are critical to growth
http://www.voxeu.org/article/how-cooperation-evolves-history-expectations-and-leadership
http://www.forbes.com/2006/09/22/trust-economy-markets-tech_cx_th_06trust_0925harford.html
micro never mentions them.

Clearly there are some instances where growth is hurt and there is deadweight loss. But in most such cases, the deadweight loss is a symptom, not a cause:
http://www.voxeu.org/index.php?q=node/5742
http://www.nytimes.com/2012/09/16/world/asia/scandal-bares-corruption-hampering-indias-growth.html
http://www.project-syndicate.org/commentary/bhagwati7/English
but there are a few exceptions:
http://www.macroresilience.com/2011/01/31/the-great-stagnation-and-special-interests
http://krugman.blogs.nytimes.com/2013/06/19/how-are-these-times-different/


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