I. Introduction, 138. — II. Outline of Arrow's model and results, 138. — III. Public goods, 139. — IV. Expenditures as produced commodities, 140. — V. Examples, 142. — VI. Conclusion, 144.

An individual with known preferences over lotteries can be led to accept random wealth distributions different from his initial endowment by a sequential process in which some uncertainty is resolved and he is offered a new lottery in place of the remaining uncertainty. This paper examines the restrictions that can be placed on an individual's preferences by axioms that stipulate that such a process not be able to generate a new wealth distribution that is prima facie inferior to the original. The relationship of these axioms to the independence axiom of von Neumann and Morgenstern and to the quasi convexity of preferences in the wealth distribution are explored.

This paper studies the efficient agreements about the dependence of workers' earnings on employment, when the employment level is controlled by firms.The firms' .superiorinformation about profitability conditions is responsible for this form of contract governance.Under plausible assumptions, such aj^reements will cause employment to diverge from efficiency as a byproduct of their attempt to mitigate risk.ll is shown that, if leisure is a normal good and firms are risk-neutral, employment is always ahoue the efficient level.Such a one-period implicit contracting model cannot, therefore, be used to "explain" unemployment as a rational byproduct of risk sharing between workers and a risk-neutral firm under conditions of asymmetric information.

I. A model of financial equilibrium, 412.—IL Effects of changes in the profit tax rate, 418.—III. Effects of changes in the taxation of retained earnings, 423.—IV. The nonneutrality of the corporate income tax, 427.—V. Conclusion, 430.