viewpoint, policies to reduce inequality may help economic output by building social support for allowing

markets to operate.

FIGURE 15.10 The Tradeoff between Incentives and Economic Equality (a) Society faces a trade-off where any

attempt to move toward greater equality, like moving from choice A to B, involves a reduction in economic output.

(b) Situations can arise like point C, where it is possible both to increase equality and also to increase economic

output, to a choice like D. It may also be possible to increase equality with little impact on economic output, like the

movement from choice D to E. However, at some point, too aggressive a push for equality will tend to reduce

economic output, as in the shift from E to F.

The tradeoff in Figure 15.10 (b) then flattens out in the area between points D and E, which reflects the pattern

that a number of countries that provide similar levels of income to their citizens—the United States, Canada,
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