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The Political Economy Theorem

Author

Listed:
  • Alessandro SACCAL

    (Independent Researcher, Italy)

Abstract

Welfare maximization is constrained by the ultimate frontier of efficient allocations, with a unique, interior optimum. By the second welfare theorem, such an optimum depends on a specific wealth distribution out of innumerable ones at given prices, whereby the state cannot refrain from redistributing. Such has long been known by the profession, but it never received a mathematical formalization, which this article takes up. Building on the literature, this research also presents two simplified proofs to the two welfare theorems and a mathematical formalization of the resolution to the compromise between equity and efficiency, for the additional constraint binds the social welfare function in equity and it originates the ultimate possibility frontier in efficiency.

Suggested Citation

  • Alessandro SACCAL, 2020. "The Political Economy Theorem," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 11(2), pages 111-116.
    • Handle: RePEc:srs:jtpref:v:11:y:2020:i:2:p:111-116
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    References listed on IDEAS

    as
    1. David M. Kreps, 2012. "Microeconomic Foundations I: Choice and Competitive Markets," Economics Books, Princeton University Press, edition 1, volume 1, number 9890.
    2. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • P46 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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