Policy-speak evidence that each of Pareto efficient competition and transfer payments are necessary conditions for first-best progressions to welfare

Oghenovo A. Obrimah ()
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Oghenovo A. Obrimah: FISK University

SN Business & Economics, 2023, vol. 3, issue 8, 1-30

Abstract: Abstract Suppose innovation arrives at some optimal rate within every sector of an economy that is operating at full employment. Under the stated assumption and the additional assumption, to wit, innovation induces increases to the price level, this study shows that, independently, the presence of Pareto efficient competition within private sectors and the presence of transfer payments from government both are necessary conditions for the achievement of first-best progression to the welfare of economic agents. For concreteness, first-best welfare is attained to ‘if and only if’ (i) proportional efficiency savings which accompany new product innovations not only are greater than proportional increases to the price level, but also are, at the very least, commensurate to investors’ required returns on capital; and (ii) some proportion, $$\phi$$ ϕ —which has a strict mathematical lower bound—of increases to tax receipts is applied towards subsidization of the costs of ‘social services’. With $$\phi$$ ϕ a function of each of the marginal tax rate for investors and the ‘fiscal price’ of social services, $$\phi$$ ϕ is determined by prices that are specific to government, as such is not manipulable by labor. Condition (i) casts Government subsidies and policies of Government which induce the private sector to compete with reference, not only to product innovations, but also with reference to production efficiency as initiatives that facilitate first-best welfare. Importantly, contrary to some views, health care explicitly is shown to have qualification as a ‘social service’, as such as a service that, ideally is underwritten by Government.

Keywords: Wage–Price–Cost equilibriums; Technical change; Social services; Subsidies; Taxes; Diffusions of innovation (search for similar items in EconPapers)
JEL-codes: E61 E62 H40 O20 O33 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s43546-023-00523-3

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