That is the danger of the edgeworth box... in saying that socially inefficient outcomes are efficient.
The goods can actually be reallocated through transfers from one budget to the other. In this way, both people could eat a balanced diet.
Economics is a study of the way it is, and of the way it could be if we made certain changes. In that sense, the edgeworth box can show us how much to transfer from one budget to the other to achieve better allocation of resources.
An indifference curve also represents a condition that a person may have to accept beyond their control and try to be satisfied with. Other indifference curves may be preferable.
If a person must accept a diet deficient in calories and the other person has more calories than they need, then both can be made better off by reallocating some food to the person whose diet is deficient in calories.
The analogy assumes that indifference curves are not equal and some may be socially preferable.
@polvotierno You are miss applying the concept of indifference curves and choice. Of course, everyone "wants" to be on the highest possible indifference curve, but are constrained (normally by a budget). Again, efficient means you can't "reallocate" the two goods to make one person better off without making the other worse off.
Economics is not a study of right and wrong! It is a study of the way it is, not the way it ought to be.
It is not good to say that every point along the contract line is efficient.
I make an analogy to calorie intake. Put quantity of different foods on the edges and each indifference curve represents a specific calorie intake.
Some curves will show a diet deficient in calories. Also, the pareto optimum on these lines may show a tendency to obesity for the other person. Ultimately these pareto optimums are not efficient.
Pareto optimums in the middle would show a more efficient use of food.
@polvotierno I think you repeated yourself and I don't want to do the same. SO... do try to find the definition of efficiency that economists use. Find it online or find it in an economics book.
1. Your calorie analogy is wrong. An indifference curve shows how a person prefers or is indifferent to one food to another. Nothing to do with nutrition! For example it could show cake and yogurt. Joe my be a health nut and David could be fat software developer.
There is a danger with the edgeworth box to say that every point along the contract line is efficient, that is wrong.
I make an analogy to calories in a diet. Put quantity of different foods on the edges and each line represents calorie intake of foods.
Some lines show a diet deficient in calories even though you can find a pareto optimum there. Likewise the other person's diet will show a tendency to obesity.
Thus there is a balanced optimality between the two extremes of the contract line.
@polvotierno I appreciate your observation but I am not sure I understand your point. The term efficiency in economics does not mean "good" or "perfect." It means in this case, "neither Joe nor David" can be better off without the other being worse off. The term, "efficiency" in economics means, "no one consumer can be better off without hurting another consumer."
So helpful! Thank you for posting this.
tontonzinha18 2 months ago
That is the danger of the edgeworth box... in saying that socially inefficient outcomes are efficient.
The goods can actually be reallocated through transfers from one budget to the other. In this way, both people could eat a balanced diet.
Economics is a study of the way it is, and of the way it could be if we made certain changes. In that sense, the edgeworth box can show us how much to transfer from one budget to the other to achieve better allocation of resources.
polvotierno 8 months ago
An indifference curve also represents a condition that a person may have to accept beyond their control and try to be satisfied with. Other indifference curves may be preferable.
If a person must accept a diet deficient in calories and the other person has more calories than they need, then both can be made better off by reallocating some food to the person whose diet is deficient in calories.
The analogy assumes that indifference curves are not equal and some may be socially preferable.
polvotierno 8 months ago
@polvotierno You are miss applying the concept of indifference curves and choice. Of course, everyone "wants" to be on the highest possible indifference curve, but are constrained (normally by a budget). Again, efficient means you can't "reallocate" the two goods to make one person better off without making the other worse off.
Economics is not a study of right and wrong! It is a study of the way it is, not the way it ought to be.
economicsfun 8 months ago
It is not good to say that every point along the contract line is efficient.
I make an analogy to calorie intake. Put quantity of different foods on the edges and each indifference curve represents a specific calorie intake.
Some curves will show a diet deficient in calories. Also, the pareto optimum on these lines may show a tendency to obesity for the other person. Ultimately these pareto optimums are not efficient.
Pareto optimums in the middle would show a more efficient use of food.
polvotierno 8 months ago
@polvotierno I think you repeated yourself and I don't want to do the same. SO... do try to find the definition of efficiency that economists use. Find it online or find it in an economics book.
1. Your calorie analogy is wrong. An indifference curve shows how a person prefers or is indifferent to one food to another. Nothing to do with nutrition! For example it could show cake and yogurt. Joe my be a health nut and David could be fat software developer.
economicsfun 8 months ago
There is a danger with the edgeworth box to say that every point along the contract line is efficient, that is wrong.
I make an analogy to calories in a diet. Put quantity of different foods on the edges and each line represents calorie intake of foods.
Some lines show a diet deficient in calories even though you can find a pareto optimum there. Likewise the other person's diet will show a tendency to obesity.
Thus there is a balanced optimality between the two extremes of the contract line.
polvotierno 9 months ago
@polvotierno I appreciate your observation but I am not sure I understand your point. The term efficiency in economics does not mean "good" or "perfect." It means in this case, "neither Joe nor David" can be better off without the other being worse off. The term, "efficiency" in economics means, "no one consumer can be better off without hurting another consumer."
economicsfun 8 months ago 2
thank. good stuff.
letsroll20 9 months ago