| Sumario: | In a recent issue of May, 1974, "Review," Robert Meyer employed the tools of non-linear programming in an attempt to refute a conclusion of his 1967 externality article which had once before been the basis for a discussion Meyer's article showed that "a per unit tax which has the twin objectives of keeping an individual on his starting point indifference curve and attaining a Pareto optimum is not, in general, possible." In other words, simultaneous achievement of exact compensation and Pareto optimality requires a tax scheme which is more complicated than a constant per unit tax or subsidy. At first glance Meyer's programming formulation seems to be capable of yielding constant per unit taxes or subsidies which do result in the simultaneous achievement of Pareto optimality and exact compensation. However, a second look reveals that Meyer's scheme requires something more than constant per unit tax-subsidy payments, for example, lump sum transfers. In the standard Pigouvian treatment with compensation as a goal, individual begin with certain endowments of factors or goods, and a legal system which constraints the use of the goods.
|
|---|