Sustainable Heterogeneity as the Unique Socially Optimal Allocation for Almost All Social Welfare Functions
The socially optimal allocation has been regarded to be unspecifiable because of utility’s interpersonal incomparability, Arrow’s general possibility theorem, and other factors. This paper examines this problem by focusing not on the social welfare function but instead on the utility possibility frontier in dynamic models with a heterogeneous population. A unique balanced growth path was found on which all of the optimality conditions of all heterogeneous households are equally and indefinitely satisfied (sustainable heterogeneity). With appropriate government interventions, such a path is always achievable and is uniquely socially optimal for almost all generally usable (i.e., preferences are complete, transitive, and continuous) social welfare functions. The only exceptions are some variants in Nietzsche type social welfare functions, but those types of welfare functions will rarely be adopted in democratic societies. This result indicates that it is no longer necessary to specify the shape of the social welfare function to determine the socially optimal growth path in a heterogeneous population.
|Date of creation:||29 Aug 2012|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Taiji Harashima, 2005.
"Endogenous Growth Models in Open Economies: A Possibility of Permanent Current Account Deficits,"
0502001, EconWPA, revised 10 Feb 2005.
- Harashima, Taiji, 2009. "Endogenous Growth Models in Open Economies: A Possibility of Permanent Current Account Deficits," MPRA Paper 19385, University Library of Munich, Germany.
- Ghiglino, Christian, 2002. "Introduction to a General Equilibrium Approach to Economic Growth," Journal of Economic Theory, Elsevier, vol. 105(1), pages 1-17, July.
- Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-551, August.
- Edward C. Prescott, 1997. "Needed: a theory of total factor productivity," Staff Report 242, Federal Reserve Bank of Minneapolis.
- Farmer, Roger E.A. & Lahiri, Amartya, 2005. "Recursive preferences and balanced growth," Journal of Economic Theory, Elsevier, vol. 125(1), pages 61-77, November.
- Farmer, Roger E A & Lahiri, Amartya, 2003. "Recursive Preferences and Balanced Growth," CEPR Discussion Papers 3949, C.E.P.R. Discussion Papers.
- Samwick, Andrew A., 1998. "Discount rate heterogeneity and social security reform," Journal of Development Economics, Elsevier, vol. 57(1), pages 117-146, October.
- Andrew A. Samwick, 1997. "Discount Rate Heterogeneity and Social Security Reform," NBER Working Papers 6219, National Bureau of Economic Research, Inc.
- Harashima, Taiji, 2010. "Sustainable Heterogeneity: Inequality, Growth, and Social Welfare in a Heterogeneous Population," MPRA Paper 22521, University Library of Munich, Germany.
- Harashima, Taiji, 2009. "Trade Liberalization and Heterogeneous Rates of Time Preference across Countries: A Possibility of Trade Deficits with China," MPRA Paper 19386, University Library of Munich, Germany.
- Taiji Harashima, 2004. "A New Asymptotically Non-Scale Endogenous Growth Model," Development and Comp Systems 0412009, EconWPA, revised 20 Dec 2004.
- Robert A. Becker, 1980. "On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households," The Quarterly Journal of Economics, Oxford University Press, vol. 95(2), pages 375-382.
- Harashima, Taiji, 2009. "A Theory of Total Factor Productivity and the Convergence Hypothesis: Workers’ Innovations as an Essential Element," MPRA Paper 15508, University Library of Munich, Germany. Full references (including those not matched with items on IDEAS)