Efficiency and Equity in Welfare Economics by PierCarlo Nicola

Author:PierCarlo Nicola
Language: eng
Format: epub
Publisher: Springer Berlin Heidelberg, Berlin, Heidelberg

as we will now assume. We know from Sect. 7.2 that this relation is verified when the social production function satisfies (7.11).

From relations (7.29) we derive

(7.32)

and inserting these values in the production function (7.14), we obtain

(7.33)

expressing maximum social output as a function only of multipliers. Formula (7.33) can now be inserted in formulae (7.32) to obtain the y j s as functions of the multipliers. To determine the values of the multipliers, we must insert (7.31)–(7.33) into (7.13), (7.15), and (7.30); but, due to the complexity of relations (7.32) and (7.33), it is impossible to explicitly obtain the formulae for the multipliers. Thus, we must try a different path.

As noted previously,6 to maximize W θ, or , Y must be maximized. This fact directly determines the optimal values, s, of individual contributions to social production, namely , or formulae (7.24). Thus we obtain maximum social output as expressed by (7.22). In passing, from the last formula, note that to obtain social output, , which is greater than the initial social product, , the following inequality must be verified:

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.