Ecanomia política waroi

sreview
campetitive exchange economy

J 1, 2,.... 34 set
of people
=
3

consumpticn space
xi M

IIe Z
=
2

ri

camnsamptican
bumalle

uitxioik canntiosaus hi
momozomic

quasi
-cancaue
k
-xi-irge
i
arrocation

lülkix 2
J1
?....
Gar each individual i
mwieirê
ensslarwment

wilewiscr NP
!
?...
allocation is
feasibre if
.
cans

éxièü
A
Edgewarth box

n
-J-2
42
witww
?
Xis

üú
nO

pare to domina a w

wixi
xž
individece
!
allocations blocking

def we say that BEXis

XEX is pareto dominated by
.
Il
zar every iE J

mirgilewirxio
21 far some jE J

iryiowcxii

A
aes feasable arrocation is called paretz officient if its not pareto dominated byy anyy feasable YEX

E IwiYiess
-?J,3mibiz7,
coaliciain ia man empty grup
F
of peapre
BISCI I grand coalition
coacitiam
i singletan coclition
 def coalitian s blocks an
arrocation sarevery its there exists
YElR

"xs.t.
Il miragile wirkil Bar all IES

21 ui ryils mirxis gar some ESj

JEsYitswi
B İEs

1
res the set of unbrocked seasible arrocations is called the care

im the care sit camnot be brocked

is pareto afficient
the campetitive equilibria is
always in the care

A
deg eqcampecitivo
liroi

J B 2. 51
:
. . .
1,
Two goods xi good
-private
Q good
-public
LI QEIR
+
,
oiso
WT IEQI o
cuasilinear function
-FQiGraI
windependent of the private good cansumptian
f cancave

8 gixo
iso,
XERR
choose TO
XIB MEK LIXI S P
.XIW
-
.t.
,II-WI
WIE IRI - good endawment
+
private
rQES
!
Q of private good into the production of public good
-imput
Q
-819I-9
xi
$
pareto efficient

"'
"
jiispaying
i is paaging

QQQDA
O
Q

siraéqizi giradzoi
Bowen candition
esficency in public good economys
-samvelsan
. max
TE = QUEQPE
O
MRSi=MRT
{QIY
.QI
Voluntany Brovisian game

J b ...

1,2,
J4
5
Q

'ELO,wiO
wr

straiegies

pay offi

uirqi
q
,
-il=wi-qirøiGrqizqil
qi of everybody besides i
-cantributions
qui q
5
-.
choose Q wi J to max winqitziGiqitqrio
'EI0,
100- game EI
pay inn the simprest isimultarieo o
gi.
-afg
{
pareto eq
-200
-efficen
provision equiribrium
owormmiag

Q
carning back to Choose LO W J to max wi -qitQi
Geqirqit
:
'E
,
foc rinteriany girQHE Q
:
the are who wants the most cantributes tohis orstimal

W he cantribetes the most as if he was alane

SIQusf
MAxBQiYTQ
-max?0ik
QI QUE QPE
=S
The solaction is inefficient with puabolic goods

Let
's
imagine we can tax

4 income tax

voting over proporticna tan

income

TELO
,IN
let

qi Z wi
=
uir tleli
-twiaøigrzëwil
I
-TIIW'TQigIte
i as a dictatar choose TIELON to Max woil
:
,

rinderiar witØigi
Foc
/jiëwitsii
 II

-TIIWitQigIte
dictutar TIECO wil

,N
i
as a choose to max

:
,

witqigiljiëwirsüi
Foc rinieriard

giral
Wë

-
wi

assuming Q Fi mwi leri The richer the dictatar

girad

=1
-

.
W the knver the

I Ws
tax rates
uipgi
in

.
-

mm
tax base

m
w torer

srøpefEdemocracy
5
Qaemocrcy QPE

.
J w in the
econams II w

5
where
'IQPeI-EG.E
everyane
caues abaut the
imeck
pubric good

awer it
if the median is will provide of
rsifjd
tire public good d
more

optimmal raex rate

"

:
t
:,
" st
t t z t 7

w sww w
3
result
?s
crassic
income tu
r
censing
universar suffrage
has propecties to
fanchise
erectorar

wnean
ween
on
estblishing

what shawd
democracies

happen
the public good
in the side
of the
finaunce
goverment

The rich are impartnt

to the mean
i
they
push it
higher
let the rich
med gets closer to the mean if lanly vote
 16
rees A lof
of things

at
caud go variaus voting can
go wrang
wrang with

?
is member cest

.
JIS Y on
ww b

4
-B
,
,
6 9 merrots

S Bz b
:
swsm

4 Qzi wobsm

dimerulity rule the ane

with most voles
8 It
always gives a transitive ranking
d is this coes not
gives the It easyy

's
to get
m PbPw result of the voting rare
d
9-6 vote time
obposieerenkings everay
milk is the loser in the majority vole
sae preferences
is beer and milk
T
wine the winner
,
defeats
binang majcerity rere i wPbsm wine wimner

-candarset
milk -

candorset loseer

need to collect less infarmation

Why is
pleraulity used instead of binary majarity Because you
?
A marquese casdarcet
candarcet paradax
E
6 m s ew s 1

S bomow

u w s s 0 m

on P w B
P
b
M
.
{
s
A be
-chair
is to commanded
B
-chain
reach math

C the chair
-Replace
on §
A
Agenda
030s
BrC SA
birscarns
Aß
oor
agerschen
A C B C

shauldi
't
iAgends
s rerevant It have staried
when we dant mare A us B

rule
a
binary majarily
Agendas lets yau nat ß [

choosing candarcet roser

A BE A
probrem it gives the pareer
:
solution to the one who sets

the æegenda
.
 multy raund systems

-
rum

-ofgs
ex
-France
do nat choose the candacet looser
you

2 raund off like plecelity in the girst rund then rss wo face ane in the secand

-an-ae
raund
.
too to
B
this system gives yaul mare gengorandeving

's
s araws more participation

Anoner
example

results of student
's
an cauncil

X B
=?A,
,CS
5 =
26

ş sub committee
à

5- B
13 -52
3-
z
I
backing and spliting
A DB SC
manotanicity paradox
Ll
U APBSC í
t
:
B beasc
by tre
z
rn
i
b wioraled rale
:BOAIC
-ogf
3: CsASB G AB

3: BO COA
3: C BA

BA CA

dr d
A A

Jaint cammittee

BC

dr
B

b
Deparkumental election

X= theys use Barda caunt

IA,B,E}
J alternatives
feel ruusking of
=IS
7 AoBtaatney have top paints
-2
the incentive
7 B PASL second paints
-1
tochange thind paints
-o
i C AßB

A rs
IS
-22
Büzl zl
what caurd go
wrang
l y
2 They losins are

Im
4
C
=
- they swith and put A lo
in the rlast vate
sincere
voting In arder to cambane A 1 I have to look naw is c in the rusking
oB
 social chaice i

8ror
Kenneth Arraw

ro

8
" IFe3l,2s...8)~
iE

antscannes

XiGEX
iEs

kering rithirks x is at lea st as good as

y

l
I
!
si strictly belter than

mi
indifferent to

Ixsigita sxoring & treggixd

H
far simplicite X

-Rx00
lxniga - exeing & geied
o
ai cambiete preader
properties
:
campleteness rational
preserence
transitivitis
I si is cambiele sar ary YoXEI either xxiy ar yaix rar bothy

I 2! is transitive if sar any XYIZEX s xdiy & yaiz ixxiz

.t.
Ye
=?Y,?...2eE
r

pregerence
profire

pregerence
zr aggregaeticen
2.2 Ä
rere
oßrzi
Şü
~
o
beciai

probreum
}
l
-

social chaice sure

xR
g

Isocietey thirks
"
x is at least as good as
y

zi
ßa d b

Pü Z
~
 mechanisem designs

igame
7 .

Imessagefsocial
autcomes

rX
rerections

space

mrm

mechanism

simpre case

IX
-2
maj avity rule

xrea y off
Hhietixpigherit {
IEDiysies
universel domain rUl
EüŞÇbç
far 2 over X either areaib briaia rar bothl
any ar

Any preference profile

results in a valid social camparisian

asumptiansi

l
Amonymity lAI inclividual names do nat
matter

io as lang as aur
preferences do nat
change aur names do not matter
,
about haw
we care
many xou preffer x
toy
Segemetus
ary pregger y tox
Xry cure
inchiggerent
Neutrality INl do malter
s
alternative names nat
:
spositive sespansiveness

Iil momoranicity if individeced preserences switch insavar of

:
iusy it camnat nurt x

x
Prainy i
88
filtixioigse
if neither a
prerlb nare bpreiia them asrib

siil Respansivenessi If thee tie

I then inclividual
changeing
4ssbyI
is ane
any
a

their preference wavid brake it

 Lat HIx

-Z
Thearem the aniy preference aggregation rule that sufisgies AN
simple
BR an UDis the
lmagi majarites rare

3: binary majarity rre scandarcetli candarcet paradox

X a 0, b

4
={
,
=- { 1, 3 } 2,

icslosb
I
bezaszo
3 O 3
o B 8 sa

apreiooeeiib pebia abloi

Homewwark scrntican

micxi qe wiro
-xit2Tø
,
kPlxsQlex w
?-20
?FZWQ
hi

I
I

-xlt3sa
Bawver ül
-samversam
42 zra
w - +3

x2
a

?
FarQoxt EzTQP "
I
DO

Qülize
XnX Q =30
?t
Q É
"
j

xitx
:
-

-
-

2-30-9-a7Brul
312
-
-

-
-

QPE Es lé
MItlR 4 9 4 32'
ith?+
+
Il2d-
.
ra-a7Brulk
ZaBr

a
4lt3rZ
It h I
3
I
J 31, 2
J
n,...
}
5
2: over *-
cambrele
transitive

se 2 = 31?. .
+?
rs
T?
rras

universael dorain ruBl

far every preserence profile Yr Sar anyy XYEXeither xzreig ar Ireasi

tramsitivitageti
if xrexsdy & yregsizss xreiz
 weak Bareto candition wPl i everyits

8sar
using
xppbling

independiente of irrerevant alternatives IJJAI to krow the social

ranking of Iby exrei oruyrizel
it enranger
's
indivicmae betwten
to reriy everyil
knaw
ankings or yexi far

Thearem arrowww Irageneral possibility theorcm

!
Let 14 13& ret Reer satisfy T wß & JJA an UD then there exits dE such that x =

,
3d
=
sxprarly
Amartyasen
The impossibilitag of paretian liberarism

- liberalism
minimal
-
partor
w
tramsitivity
-

an uB

X
3
5=3 1, 2
h
XüŞkokrxak

Ranking between h ana to is respansabilitys of hdko

-exprsixa
Ranking between 42 and to is respansubilityy of 2 428? Prelko
xo=IX2
koéxisha
kieaxzs
?xo
LWP x
.PX2
4
aPto
TiLIßto

IF
hes 3 5 x 00
zsroi

Thearem Every preserence aggregation rure that satisfies weak paretos transitivity
:
I JJA an universal domain is dictatorial

reement
unanimans ag respecio
rwwoi
x 4 Sarallies then
apparly
arele
yresiz
=s
bureenig Its
,
P
dantcst absalat bananas if Baul anly want to rank appres and oranges ISJAI
 Re

.
defs cansider a preserence agregation rue

A coaritian
x
ISCJ is y
called
E
semi X
with respect if
to alternatives

-decisive
mberewew
xeing sa all iES
and
isix for cll u Es
theu
hprslii
s is mam empty always
-

nn
dega
A coaritian BES
J is semi if it is a semi with respect oo every

-decisive
-decisive
pairk by E X
.
,
lezs A coaliticn SCJ is calred decisive with respect toXYEXif whenever xsin
all iEs tman
Sar xpebrly
A
besh coalitian is carred decisive
if it decisive with respect ro every pair
xyeX

Lemma 1: Of HEI & RIs safisgy WPT I JJA an UB then coaliticnSa is semi
3
-decisive
far same pair Y X then it is decisive
.XE
proof suppose Sis semi sar same pair XYEE
-decisive
lat ZEXIx cansider a
profire r such that higsiz gar anyiins
,y4.
I yeix yoiz garany ids

,
s
by seri decisiveness of with xly
-
xpreliy

by weak pareto wy PIYIZ

Theresare ,
by transitivity xpiiiztls is decisive sarx The
profire tmat x can be
&z.
replaced wwith ane alternative is
camplereing analogaus

Lemma 2 of HXIB & RIrI satisge WIT & then

JJA ank
if scJis decisive
& AUB AN A then either AarB is decisive
,BIO
-5
3=B,
}
proof S A s
,BYO
subbose Sis decisive
-ANB,
ß
A

A
13-8
cansider a preseence progile Ir 5.7.

sar sarne xeingsiz sarallie A

Esixsiy SaralliEß

yeizsix fararries
 case 1 xpeerIz

J
by

5A
UPPBIZ sar aryy b

sit Lsiz far any iE A

.
zeie far any ifA

IIA is semi sar n & Z

-decisive
Lemma ?

A is decisive
II

case 2

z rIZIm by decisiveness of s xBrring by transitivity zRieries

IIbY JJA ZPPel far any Zis Ziy gar arr iEB garace iBB

=O
,geiz
.t.
zosoi
 Oloz
super majcerrity mure
w
S

x praiy off
ediileighggelbill I

if neither
xpraring ar ybiai then
sseleg
An allermative that ina binary vole camnnot be defealed by s is carred

-majarity
a
5- majavity
winner
"

In the divide the cake problem J

51- stil
majauify

.
cablim & matebugf

R
.
64 majaritey rale
"
h4
deiri
ulkal dir
-ll-
D
D

bk

It chaice
litarian social

ut of preferences 2 on
-representation
I space Jüdo
-autcame
-
--
-
-
-
-
-

-
-

i
Miikilf Sunscticus
-efitity
4- ue e 45
retility profile UERR
b
1?...
s-
,
dei
catility possibility set

social
passible ariame
chaice
feenctican
:
CIBAGEB

lanly choose from the pareto

afficiently ontier p
gr
s

utilitzg
dossibi
Bsummetryg
2
Amanym

3
independence of irrerevant allernativesi aviability of things that oe nat chosen
shauran
.
malter social chaice
for tre

rBergsam sameelsany

social welfare suatian

Will vIR

Eut

prrofites

IJA is
necessary sar chaices to be ratianarizable by w
Au indepencience of unscancearned individuals rsucI

u ci
J
G runking shourd rat depend an peabre who ' not carer

do
l s

JUC wrUIe grail

-I
2 éE
a 3

3
satilitag sherfi
i
generalized
3 3 2

mi rill

i
i i

2
Z Zz

3 3 2
z
AS scare in variance uriios URwXsso
X

ruiirup
Wrmlej ff gür

Wrud enci gül

-FEj
sociarwergare functian
classical utalitauian rBenthamile surful
wreedewi 9 -00
zeantief
iül
wreed imim ? U .
1 s }
her,
2...
ô 4?
ceantieffy the bigger the e rmore
-I
a

ö
I bo whrat to incquarinys
v salty averse you are
zawisian

Bentham doesn incquality

't
care arsout
ùré obé doeserst
rauwts want
inequaliny
Nasen is in the middle

AIbigan
-salrani
Transfer principle the to give decreasses
robbing the rich social wergare
:
poar to

ll

9
s0
the bigger the e
the mare awerse to
inequality youu ae
measuving incquality & poverty