Final answer:
Economic policies aimed at reducing inequality can potentially lead to increased economic output by promoting social support for market operations. However, pure redistribution might cause a tradeoff between economic output and equality, depending on the specifics of the policy. The impact of economic policies on efficiency and equity is complex and context-dependent.
Step-by-step explanation:
The statement that policies based on positive economic ideas tend to decrease economic efficiency and reduce equity is not categorically true. Economic policies are complex and their impact on efficiency and equity depends on the specifics of the policy itself. Some policies, especially those that address the 'ladder of opportunity,' may enhance both equity and economic output by investing in human capital or by making markets work more efficiently. However, policies that involve pure redistribution may face a tradeoff between equality and economic output, as represented by a downward-sloping production possibility frontier (PPF). On the other hand, a PPF that first rises and then falls suggests the possibility of increasing equality and economic output simultaneously, at least to a certain extent. Policies that reduce inequality and provide a social safety net may support political stability and social support for market operations, thus potentially improving economic output.
It is important to note that while redistribution is often seen as a zero-sum game that can detract from economic output, this is not always the case. For example, by reducing poverty and inequality, social safety nets may facilitate a more productive workforce and prevent social unrest, which is beneficial for the overall economy. While the hypothesis that a well-funded social safety net might reduce economic output exists, the tradeoff is not always straightforward or inevitable.