Equity (economics)

Equity, or economic equality, is the concept or idea of fairness in economics, particularly in regard to taxation or welfare economics. More specifically, it may refer to a movement that strives to provide equal life chances regardless of identity, to provide all citizens with a basic and equal minimum of income, goods, and services or to increase funds and commitment for redistribution. According to Peter Corning, there are three distinct categories of substantive fairness (equality, equity, and reciprocity) that must be combined and balanced in order to achieve a truly fair society. Inequality and inequities have significantly increased in recent decades. Equity is based on the idea of moral equality. Equity looks at the distribution of capital, goods, and access to services throughout an economy and is often measured using tools such as the Gini index. Equity may be distinguished from economic efficiency in overall evaluation of social welfare. Although 'equity' has broader uses, it may be posed as a counterpart to economic inequality in yielding a "good" distribution of wealth. It has been studied in experimental economics as inequity aversion. In public finance, horizontal equity is the idea that people with a similar ability to pay taxes should pay the same or similar amounts. It is related to the concept of tax neutrality or the idea that the tax system should not discriminate between similar things or people, or unduly distort behavior. Vertical equity usually refers to the idea that people with a greater ability to pay taxes should pay more. If the rich pay more in proportion to their income, this is known as a proportional tax; if they pay an increasing proportion, this is termed a progressive tax, sometimes associated with redistribution of wealth. Equitability in fair division means every person’s subjective valuation of their own share of some goods is the same. The surplus procedure (SP) achieves a more complex variant called proportional equitability. For more than two people, a division cannot always both be equitable and envy-free.