Final answer:
The social-value curve concerns how individuals' or firms' economic and social contributions are valued, with the idea that rewards should be proportional to these contributions. It is associated with the Davis-Moore thesis and involves considerations like social benefits and the social rate of return that exceed private benefits. The Lorenz curve is a related tool used to visualize income distribution and social value over time.
Step-by-step explanation:
The concept of the social-value curve relates to how the economic and social contributions of individuals or firms are valued and rewarded within a society. It rests on the premise that people should be rewarded for their work activity in proportion to the value of their contribution to the social product. This is reflected in various social theories, such as the Davis-Moore thesis, which posits that the more functionally important a social role is, the higher the reward should be, suggesting a degree of social stratification is a necessity for society to function effectively.
Moreover, the discussion of social benefits, such as those resulting from a company's private investments that spill over to third parties, aligns with the social-value curve by illustrating the distinction between private and social benefits. In the case of a firm investing in innovation, the benefits may not be entirely captured by the market demand curve, which typically reflects only the private benefits. Instead, there are additional social benefits that the firm may not be able to monopolize, leading to a difference between the private and social rate of return.
An exemplar of examining social value through income distribution is the use of the Lorenz curve, which visualizes the cumulative shares of income received by different segments of a population. Changes in the shape of the Lorenz curve over time can indicate shifts towards greater or lesser income inequality, thereby implying changes in how social value is distributed within the society.