Showing papers by "Kenneth J. Arrow published in 1979"

The property rights doctrine and demand revelation under incomplete information

Abstract: Publisher Summary This chapter discusses an approach to demand revelation, which achieves efficiency and avoids the waste of resources in the incentive payments. Now, optimal resource allocation will not be achieved by a competitive market system if there are technological externalities. These are goods for which no market can be formed. A conclusion that is usually drawn from the presence of externalities not mediated through competitive markets is that the state has to intervene in some form to improve resource allocation, whether in the form of taxes and subsidies or other regulatory forms. There has been opposition to the property rights thesis stating that in principle clear definition of property rights is sufficient to ensure efficiency. The property rights theorists do not usually set out their underlying assumptions with the utmost clarity; their basic postulate is the same one that underlies the theory of cooperative games. This argument depends crucially on the unstated assumption that every player knows every other player's payoff (utility, profit, whatever) as a function of the strategies played. In the case of bargaining over externalities, the strategies might be offers and counteroffer strategies, that is, plans beforehand to make a counteroffer as a function of the initial offer. Strategy-proof procedures are possible if the orderings are restricted; this assumption is in fact the basis of most of the demand revelation procedures.

Optimal and voluntary income distribution

Abstract: Introduction and summary The concept of the social welfare function was introduced by Bergson in his classic paper (1938) to express preferences over resource allocations to all individuals in society. Just as the commodity bundles of an individual are supposed to be compared by his or her individual preference ordering, so the alternative allocations of commodity bundles to all individuals can be ordered by a social welfare ordering over this entire space. As with any ordering satisfying certain regularity properties, the social welfare ordering can be represented by a real-valued function, the social welfare function. Its significance is essentially ordinal, but under additional conditions of separability the function representing an ordering can be chosen to be additive in an appropriate choice of variables. The optimization of a social welfare function should determine the entire allocation of resources among individuals and therefore includes the normative problems of income distribution. To concentrate on this topic, I will confine attention to the special case where there is only one commodity in the economic system. A resource allocation is then simply a vector with a (nonnegative) component for every individual in the economy. To combine attention to the simplest normative aspects, I will further abstract from incentive questions. It will simply be assumed that the total available of the one commodity is given and is not diminished by any transfers.

Studies in Resource Allocation Processes.

Abstract: One of the central questions of economics relates to the coordination of individual units within a large organization to achieve the central objectives of that organization. This book examines the problems involved in allocating resources in an economic system where decision-making is decentralized into the hands of individuals and individual enterprises. The decisions made by these economic agents must be coordinated because the input decisions of some must eventually equal the output decisions of others. Coordination arises naturally out of the mathematical theory of optimization but there is still the question of how it can be achieved in practice with dispersed knowledge. The essays here explore the many facets of this problem. Nine papers are grouped under the title 'Economies with a single maximand'. They include papers on static and dynamic optimization, decentralization within firms, and nonconvexities in optimizing problems. Fourteen papers are concerned with 'Economies with multiple objectives'. Among the topics covered here are stability of competitive equilibrium, stability in oligopology, and dynamic shortages. The final part of the book includes three papers on informational efficiency and informationally decentralized systems. Leonid Hurwitcz is the Nobel Prize Winner 2007 for The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, along with colleagues Eric Maskin and Roger Myerson, for his work on the effectiveness of markets.

Pareto Efficiency with Costly Transfers.

Abstract: : The concept of Pareto efficiency, as ordinarily applied, implies that costless redistributive transfers are possible. This paper generalizes the concept to a simple case where transfers of a given good involve losses mesasurable in that good. The Pareto efficiency of a given allocation then depends on the initial distribution endowments. For a given allocation, then, we can ask: (1) whether there exists any endowment allocation for which the given allocation is Pareto efficient; and (2) if there is, what is the class of endowment allocations for which it is efficient. These questions are answered in the paper.

Applied research for social policy : the United States and the Federal Republic of Germany compared

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