Knowledge that Transforms

We study a standard n-commodity model in which equilibrium positions are characterized by specified inequalities between society's marginal rates of transformation in production and a single consumer's marginal rates of substitution in consumption; these inequalities are exemplified by, but not limited to, excise and subsidies. We explore circumstances under which certain increases in these taxes and subsidies can be said to decrease welfare. In order to do so, we look for conditions under which the equilibrium consumption vector is well defined by a specification of the and subsidies, and find that the conditions required are stringent. Among our conclusions is the proposition that the validity of consumers' surplus measures for analyzing such problems may depend on assumptions that are more strict than their users have realized.

[The results of A. K. Sen and P. K. Pattanaik on sufficient conditions for the transitivity of simple majorities are extended to the case where it is not assumed that the individual's indifference relations are transitive.]

in the two sectors. Theorem 2 summarizes the discussion on this subject. The proofs of the proposition leading to Theorems 1 and 2 are illustrated graphically. In order to analyze the effect on the sign of the supply function in this economy, the ES of products with respect to their prices is expressed in terms of the parameters of the individual production functions. The expression shows clearly the augmentation effect observed by Johnson [1] (i.e., in the absence of distortion, the ES between products is larger than those which exist between factors). Finally, Theorem 3 states conditions under which the supply function is increasing, declining, perfectly elastic, or a combination of these.