Market efficiency occurs as a result of effective competition whereby competing producers have an equal opportunity to produce and market their products and services to consumers who are free to choose the products that satisfy their needs at the most favorable costs among various producers. The inefficient producers incur greater costs in their production processes hence their products become more expensive and are likely to be avoided by consumers. Under such circumstances, they are left with no option but to exit the venture. Market efficiency is, therefore, a self-regulating phenomenon. In case of serious market failure, ingenious state intervention may help to enhance efficiency and equitable distribution of resources. This paper discusses the notion that efficiency is best left to the market, equity to the State.
The state asserts the value of all citizens and the need to guarantee equality and justice for all. The government has a duty to ensure that state resources are used for the benefit of citizens in an efficient manner. However, there exists a paradox with regard to the manner in which the economic environment is organized. The institutional arrangement is such that every citizen has to fend for him/herself by engaging inefficient practices in all aspects of life including production and consumption. Those who are not successful in entrepreneurship suffer while those without jobs go hungry. Generally, the society is focused on the promotion of equity while incurring an opportunity cost associated with the establishment of social and political civil liberties that are spread equally and collectively and which are envisioned to be excluded from the open market. Such liberties affect the operations of the economy and on the other hand, the market affects their functioning (Barr, 2012).
The existence of a double-edged society that comprises democracy and capitalism presents a complex relationship where one .of the aspects must not be ignored when analyzing equity and efficiency.