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Equilibrium and Efficiency under Pure Entitlement Systems

Green, Edward J. (1981) Equilibrium and Efficiency under Pure Entitlement Systems. Social Science Working Paper, 315. California Institute of Technology , Pasadena, CA. (Unpublished)

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An entitlement system is a political institution which accords various citizens’ rights to veto specific changes of social state. This paper concerns the performance of such institutions, in the absence of other centralized decision-making institutions. Specifically, questions relating to unbiasedness (the potential of an institution to support any Pareto-efficient social state as an equilibrium) in situations with externalities are discussed. Necessary conditions for an entitlement system to be unbiased regardless of a society's technology are found, and these conditions are shown to be sufficient when technology and preferences satisfy some geometric conditions (e.g., convexity). However, counterexamples to unbiasedness are provided when these conditions fail. It is argued that, even when an entitlement institution is unbiased, extensive information is required to verify this fact. The difficulty of systematically designing an unbiased system qualifies Hayek's assertion that such a system would be informationally efficient in operation.

Item Type:Report or Paper (Working Paper)
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Additional Information:Second revision. Previously revised in March 1981. Original dated to May 1980. Published as Green, Edward J. "Equilibrium and efficiency under pure entitlement systems." Public Choice 39.1 (1982): 185-212.
Group:Social Science Working Papers
Series Name:Social Science Working Paper
Issue or Number:315
Record Number:CaltechAUTHORS:20171012-143043883
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:82323
Deposited By: Jacquelyn Bussone
Deposited On:12 Oct 2017 22:53
Last Modified:03 Oct 2019 18:53

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