Recontracting and competition
We characterize the set of Walrasian allocations of an economy as the set of allocations which can be supported by abstract equilibria that satisfy a recontracting condition which reflects the idea that agents can freely trade with each other. An alternative (and weaker) recontracting condition characterizes the core. The results are extended to production economies by extending the definition of the recontracting condition to include the possibility of agents to recontract with firms. However, no optimization requirement is imposed on firms. In pure exchange economies, an abstract equilibrium is a feasible allocation and a list of choice sets, one for each agent, that satisfy the following conditions: an agent's choice set is a subset of the commodity space that includes his endowment; and each agent's equilibrium bundle is a maximal element in his choice set, with respect to his preferences. The recontracting condition requires that any agent can buy bundles from any other agent's choice set by offering the other agent a bundle he prefers to his equilibrium bundle.
Axiomatizations of neoclassical concepts for economies
Abstract We characterize the Pareto correspondence, the core and the Walras solution using the axioms of consistency, converse consistency and one-person rationality. Consistency and its converse are defined with respect to suitably constructed reduced economies for each case. Our results hold for the well-known class of coalitional production economies, which covers exchange economies as a particular case. The key reason to use this class is the observation that the reduction of an exchange economy yields a production economy.
WHY THE SOCIAL INSURANCE BUDGET IS TOO LARGE IN A DEMOCRACY
This paper develops a majority voting model to analyze the determination of taxes and transfers in a system of pay-as-yougo social insurance. The major implication is that the equilibrium size of the system is too large if votes are fully aware of the consequences of the policy. In addition, it seems likely that voters are rationally ignorant of a large portion of the cost of social insurance due to the hidden nature of the employer contribution and to the effect of the system on capital accumulatoin. This fiscal illusion works to exacerbate the overexpansion of the social insurance system.