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In economics, allocative harm describes the negative effects arising from the misallocation of the resources of production and unfair distribution of these resources within an economy. It results in discernible and quantifiable impacts on economic inequality.[1] It encompasses instances where resources of production, like labor, capital, and natural capital, are unevenly distributed, leading to diminished societal well-being, economic inefficiency, and social inequality.[2]
Definition
editAllocative harm is contrasted with economic efficiency, delineating a scenario where resources are not optimally distributed, leading to diminished societal well-being. When resources are misallocated, a loss of well-being occurs, impeding the maximization of societal welfare.[citation needed]
Examples
editGovernment policy
editAllocative harm in government policy surfaces when resources and benefits are unfairly or unevenly distributed, resulting in adverse impacts on particular individuals or groups within society. Disparities in access to critical services or opportunities stemming from government policies contribute to social and economic imbalances.[3]
Technology
editWithin technology, allocative harm emerges when biases even affect algorithms and systems, causing unjust and unequal outcomes for diverse user groups.[4] This bias can originate from societal biases reflected in artificial intelligence training data sets, leading to disparities in access and opportunities.[5]
Healthcare
editAllocative harm in health care typically refers to health inequity; rather, the unequal distribution of medical resources and services. This disparity arises from access to the social determinants of health. It may include differences in the "presence of disease, health outcomes, or access to health care"[6] between populations with a different race, ethnicity, gender, sexual orientation, disability, or socioeconomic status.[7][8]
It is important to distinguish between health inequity and health inequality. Health inequality is the term used in several countries to refer to those instances whereby the health of two demographic groups (not necessarily ethnic or racial groups) differs despite similar access to healthcare services.[9]
Education
editAllocativе harm in еducation manifеsts as an unеvеn playing fiеld across schools and communitiеs, significantly impacting studеnts' lеarning opportunitiеs and outcomеs. It arisеs from disparitiеs in rеsourcе allocation, lеading to somе schools having abundant еducational rеsourcеs whilе othеrs strugglе with shortagеs. This imbalancе not only affеcts thе quality of еducation but also limits futurе opportunitiеs for studеnts from undеr-rеsourcеd arеas. In addrеssing this issuе, thе goal is to еnsurе еquitablе accеss to high-quality еducation for all studеnts, irrеspеctivе of thеir socioеconomic background or gеographic location, paving thе way for a fairеr and morе inclusivе еducational landscapе.[10]
Causes
editMarket failure
editMarket failures can be a primary driver of allocative harm. These failures can occur due to factors such as asymmetric information, external market players, or the presence of monopoly power. For instance, firms with a lot of market influence, such as monopolies, may set high prices for their products, leading to allocative harm as low-income consumers lose access to previously available products.[citation needed]
Government interventions
editGovernment interventions in the economy can also contribute to allocative harm. High regulations leading to price ceilings, floors, and subsidies can distort market forces, causing resources to be misallocated.[11] For example, agricultural subsidies may lead to overproduction of specific crops, resulting in market inefficiency.[citation needed]
Imperfect competition
editMarkets with imperfect competition can lead to allocative harm. Firms with significant market power may not produce goods and services at optimal levels, resulting in inefficiency in the economy. Often the firms will counter their below-optimal performance with higher prices.[citation needed]
Resource feedback loops
editAllocative harm can be exacerbated by feedback loops by perpetuating and amplifying existing biases or inequalities within a system. This occurs when biased decisions are used as data for future decisions, leading to an increasingly unfair distribution of resources or opportunities over time.[12]
Consequences
editPotential consequences of allocative harm tend to mimic consequences of inefficient markets. The following are all potential consequences:
- Deadweight loss: Allocative harm leads to a deadweight loss, signifying a reduction in economic well-being. This loss occurs when resources are used inefficiently, causing a decrease in total economic surplus.[13] Deadweight loss represents the potential gain in overall economic welfare that is lost due to misallocation.
- Reduced productivity: Resource misallocation reduces overall productivity. Firms may not be using resources to their full potential, hindering economic growth and potentially lowering living standards.[citation needed]
- Income inequality: Allocative harm can intensify income inequality. Inefficient resource allocation can disproportionately affect specific groups, leading to unequal distributions of wealth and opportunities.[citation needed]
- Environmental consequences: Misallocation of resources can have adverse environmental effects. For instance, overuse of natural resources due to inefficient allocation can lead to environmental degradation and the depletion of vital resources.[citation needed]
- AI model bias: Algorithms used to train AI models can be influenced by allocative harm. This can lead to AI models with unfavorable outputs if trained off biased data.[needs copy edit][citation needed]
Mitigation
editTo address allocative harm and enhance economic efficiency, several strategies can be employed:
- Promote competition: Encouraging competition in markets can reduce the power of firms to set prices above the socially optimal level. Anti-trust laws and regulations can help prevent market concentration and reduce allocative harm.[citation needed]
- Government intervention: While government interventions can sometimes lead to allocative harm, they can also mitigate it when used judiciously. Correcting externalities, implementing progressive taxation, and providing public goods can help achieve more efficient resource allocation.[citation needed]
- Promote fair resource allocation: Ensuring government funds are allocated such that the entire population is benefited and not just overrepresented groups of the population.[citation needed]
- Transparency: Ensuring that consumers and producers have access to accurate and complete information can help reduce allocative harm. This can lead to more informed decision-making and better resource allocation.[citation needed]
- Use multiple models: Using models with varying data sets and searching for a common outcome can lead to less bias, and therefore, less allocative harm.[2] By ensuring all models are inclusive, and actively searching for outcomes that are similar, creators of algorithms can ensure all bases are covered.[citation needed]
References
edit- ^ Frenkel, Aaron (2020). "Harm, Discrimination, and Measurement". Fairness and Algorithmic Decision Making. Retrieved 2023-12-10.
- ^ a b "3. Harm, Discrimination, and Measurement — Fairness & Algorithmic Decision Making". afraenkel.github.io. Retrieved 2023-12-03. [unreliable source?]
- ^ "Understanding Bias I". Machines Gone Wrong. Retrieved 2023-12-03.
- ^ Suresh, Harini (1 Dec 2021). "A Framework for Understanding Sources of Harm throughout the Machine Learning Life Cycle". Equity and Access in Algorithms, Mechanisms, and Optimization. pp. 1–9. arXiv:1901.10002. doi:10.1145/3465416.3483305. ISBN 978-1-4503-8553-4.
- ^ "Discrimination and biases - Ethics of AI". ethics-of-ai.mooc.fi. Retrieved 2023-12-03.
- ^ Goldberg J, Hayes W, Huntley J (November 2004). Understanding Health Disparities. Health Policy Institute of Ohio.
- ^ U.S. Department of Health and Human Services (HHS), Healthy People 2010: National Health Promotion and Disease Prevention Objectives, conference ed. in two vols. (Washington, D.C., January 2000).
- ^ Fujishiro, Kaori; Ahonen, Emily Q.; Gimeno Ruiz de Porras, David; Chen, I.-Chen; Benavides, Fernando G. (2021). "Sociopolitical values and social institutions: Studying work and health equity through the lens of political economy". SSM – Population Health. 14: 100787. doi:10.1016/j.ssmph.2021.100787. ISSN 2352-8273. PMC 8056461. PMID 33898729.
- ^ Braveman P (January 2014). "What are health disparities and health equity? We need to be clear". Public Health Reports. 129 (Suppl 2): 5–8. doi:10.1177/00333549141291S203. PMC 3863701. PMID 24385658.
- ^ Smedley, Brian D.; Stith, Adrienne Y.; Colburn, Lois; Evans, Clyde H.; Medicine (US), Institute of (2001), "Inequality in Teaching and Schooling: How Opportunity Is Rationed to Students of Color in America", The Right Thing to Do, The Smart Thing to Do: Enhancing Diversity in the Health Professions: Summary of the Symposium on Diversity in Health Professions in Honor of Herbert W.Nickens, M.D., National Academies Press (US), retrieved 2023-12-05
- ^ "What Goes Wrong When Government Interferes With Prices". Hoover Institution. Retrieved 2023-12-04.
- ^ Baekgaard, Martin; Larsen, Søren K.; Mortensen, Peter B. (March 2019). "Negative feedback, political attention, and public policy". Public Administration. 97 (1): 210–225. doi:10.1111/padm.12569. ISSN 0033-3298.
- ^ "What Is an Inefficient Market? Definition, Effects, and Example". Investopedia. Retrieved 2023-12-04.