Contextualizing Importance of Government for Progressiveness of Improvements to Welfare of Economic Agents

Abstract

Suppose an economy that seeks to maintain, in perpetuity, population size and distributions for income, savings, and consumption. Regardless of births, deaths, retirements, and entry into the work force, asymptotically, there exists an infinite lived agent and only technical change facilitates increases to income. Suppose emergence of technical change that is source of `new effectiveness'. Formal theoretical predictions show technical change results in progressiveness of improvements to economic welfare if and only if independently, (a) natural resources last forever; (b) changes to wages always equilibrate with changes to price levels; (c) some proportion of increases to tax receipts progressively are applied towards facilitation of decreases to costs of social services; and all technical change that is accepted (d) induces decreases to costs of production; (e) and can be diffused across all industries. Suppose technical change is source only of `new efficiencies'. In stated context, conditions (a) and (b) cease to be binding necessary conditions. For avoidance of ambiguity, in presence of an economy in context of which technical change is sole source of increases to income, regardless, technical change lacks characterization as a sufficient condition for generation of improvements to welfare of economic agents. In aggregate, study findings show government policies that are appropriately formulated are necessary conditions for translation of technical change into progressiveness of improvements to welfare of economic agents. In stated respect, while condition (c) facilitates either of first or second-best improvements to welfare, all other conditions only suffice for maintenance of existing welfare.