Formal microeconomic foundations and the first welfare theorem

AbstractBy the first welfare theorem, competitive market equilibria belong to the core and hence are Pareto optimal. Letting money be a commodity, this paper turns these two inclusions around. More precisely, by generalizing the second welfare theorem we show that the said solutions may coincide as a common fixed point for one and the same system.Mathematical arguments invoke conjugation, convolution, and generalized gradients. Convexity is merely needed via subdifferentiablity of aggregate “cost”, and at one point only.Economic arguments hinge on idealized market mechanisms. Construed as algorithms, each stops, and a steady state prevails if and only if price-taking markets clear and value added is nil.

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Microeconomic Foundations of Reproductive Behaviour

Politická ekonomie ◽

10.18267/j.polek.736 ◽

2010 ◽

Vol 58 (3) ◽

pp. 374-391 ◽

Cited By ~ 1

Author(s):

Marek Loužek

Keyword(s):

Reproductive Behaviour ◽

Microeconomic Foundations

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The Microeconomic Foundations of Instability in Financial Markets

Long Memory in Economics ◽

10.1007/978-3-540-34625-8_11 ◽

2006 ◽

pp. 311-344

Author(s):

Alan Kirman

Keyword(s):

Financial Markets ◽

Microeconomic Foundations

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Fiscal Capacity

Pillars of Prosperity ◽

10.23943/princeton/9780691152684.003.0002 ◽

2011 ◽

Author(s):

Timothy Besley ◽

Torsten Persson

Keyword(s):

Public Finance ◽

Political Institutions ◽

State Building ◽

Political Factors ◽

Role Of Government ◽

Fiscal Capacity ◽

Common Interests ◽

To Come ◽

Microeconomic Foundations

This chapter explores the forces that shape investments in fiscal capacity. It sets out a core model that shows how this aspect of state building is influenced by economic and political factors, such as common interests and political institutions. A key feature of the model has been to delineate the types of states that can emerge in equilibrium. It also shows that the model can be given microeconomic foundations and demonstrates how it can be extended in a number of directions that lead to more realism. The main focus of the chapter has been on the extractive role of government and on some of the issues raised in traditional public-finance models. This has laid the groundwork for the analyses to come.

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