Jean Mercier Ythier, Université de Metz, BETA, Institut d’Economie Publique (firstname.lastname@example.org).
Regular Distributive Efficiency and the Distributive Liberal Social Contract
Article first published online: 7 SEP 2010
© 2010 Wiley Periodicals, Inc.
Journal of Public Economic Theory
Volume 12, Issue 5, pages 943–978, October 2010
How to Cite
MERCIER YTHIER, J. (2010), Regular Distributive Efficiency and the Distributive Liberal Social Contract. Journal of Public Economic Theory, 12: 943–978. doi: 10.1111/j.1467-9779.2010.01481.x
I thank a co-editor and two anonymous referees for comments that greatly improved the paper. I also thank participants at the conference in honour of Serge Kolm at the University of Caen, May 2007, the 7th conference of the Association for Public Economic Theory at Vanderbilt, 2007, the 7th journées d’économie publique Louis-André Gérard-Varet at Marseilles, June 2008, and seminar participants at the University of Strasbourg and the University of Paris Panthéon-Sorbonne for helpful comments on earlier drafts of the paper. The usual disclaimer applies.
- Issue published online: 7 SEP 2010
- Article first published online: 7 SEP 2010
- Received August 17, 2007; Accepted September 25, 2009.
We consider abstract social systems of private property, made of n individuals endowed with nonpaternalistic interdependent preferences, who interact through exchanges on competitive markets and Pareto-improving lump-sum transfers. The transfers follow from a distributive liberal social contract defined as a redistribution of initial endowments such that the resulting market equilibrium allocation is both: (i) a distributive optimum (i.e., is Pareto-efficient relative to individual interdependent preferences) and (ii) unanimously weakly preferred to the initial market equilibrium. We elicit minimal conditions for meaningful social contract redistribution in this setup, namely, the weighted sums of individual interdependent utility functions, built from arbitrary positive weights, have suitable properties of nonsatiation and inequality aversion; individuals have diverging views on redistribution, in some suitable sense, at (inclusive) distributive optima; and the initial market equilibrium is not a distributive optimum. We show that the relative interior of the set of social contract allocations is then a simply connected smooth manifold of dimension n − 1. We also show that the distributive liberal social contract rules out transfer paradoxes in Arrow–Debreu social systems. We show, finally, that the liberal social contract yields a norm of collective action for the optimal provision of any pure public good.