Remark: In case (4.1), and when there are subpopulations of theorists (‘those who know’) and policy makers (‘those who can do’) then there is the Van Schaaijk Corollary: “Those who know, cannot do anything about it; those who can, don’t know.” The addendum here is that ‘not-knowing’ is no excuse for a policy maker who should know.
There remains the interesting point of the potential difference between Pareto Optimality and SWF optimality, when information is the active variable. One may remember the bureaucrats in their plush jobs and the benefit recipients who enjoy their leisure. Here Lemma IV applies.
Definition: A situation is Properly Pareto Optimal (PPO) compared to an alternative iff it would be PO when some conditions are properly defined and interpreted - while it seems non-PO when these conditions are ill-defined and wrongly interpreted.
Lemma IV: For a BHL economy, regime 1
(i) has the highest level of national income,
(ii) is PPO compared to regime 0.
Proof:
(i) Equation (3-t) immediately implies Y(1)
