Definition & Reality in the General Theory of Political Economy

by Thomas Cool

Y(0).

(ii) Regard the change from 0 to 1:

(B) permanent benefit recipients are not affected by a regime switch,

(H) N(1)

N(0),

(L) K(1)

B.

Hence all agents improve in a material sense. Thus regime 1 is PO compared to regime 0, if we restrict attention to these income aspects. The actual choice is made by the SWF, and this choice includes power effects of the bureaucrats (who may want to maintain unemployment) and the unemployed (who enjoy leisure while on benefit). This contorted SWF can be cleaned up by proper contracts and execution of those contracts. Then PO is restored.