Irreversibility, Feasibility Contraction, and the Limits of Dynamic Welfare Representation

Etsusaku Shimada ()
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Etsusaku Shimada: Faculty of Policy Studies, Iwate Prefectural University

No 1127, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: Dynamic welfare theory typically relies on two background premises: losses are compensable, and continuation values can be summarized by a state variable sufficient for recursive evaluation. This paper identifies a structural boundary of both premises. When irreversible time loss strictly contracts feasible continuation sets, no finite transfer can restore welfare equivalence, and no state variable that omits feasibility structure remains preference-sufficient. Under opportunity monotonicity and transfer neutrality, strict opportunity contraction therefore yields a joint failure of compensability and state-sufficient representation. The opportunity correspondence emerges as the minimal welfare-sufficient state. The paper further shows that strict opportunity contraction arises generically in dynamically productive environments and that the same mechanism extends to Bellman recursion, social evaluation, and regulated market settings. The contribution is diagnostic rather than revisionist: it isolates a feasibility-based limit of dynamic welfare representation that is logically prior to discounting, aggregation, or curvature assumptions.

Keywords: Dynamic Welfare Representation; Irreversibility; Opportunity Contraction; Feasibility Correspondence; Compensability; Recursive Representation (search for similar items in EconPapers)
JEL-codes: C62 D60 D71 D90 (search for similar items in EconPapers)
Pages: 27pages
Date: 2026-03
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