Social and economic policies often involve a tradeoff between efficiency and equity because

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Income redistribution policies, which aim at promoting equity, often create disincentives for economic units to behave in an efficient way. This happens because taxes and transfers affect the marginal benefits and costs of economic activities, reducing the gains from efficient behavior. As a result, policies that enhance equity may come at the cost of reduced productivity, lower economic growth, and less innovation. Conversely, policies that promote efficiency may worsen inequality, as the benefits of growth and innovation tend to concentrate on those who are already better off. Thus, there is often a tradeoff between efficiency and equity in designing social and economic policies.

Social and Economic Policies Often Involve a Tradeoff Between Efficiency