Policies over time and pareto optimality

Abstract

This paper is concerned with sequences of policies that occur over time in voting models and planning procedures. The framework for our analysis includes assumptions that are satisfied by models in the corresponding literatures, together with other standard assumptions for microeconomic analysis that involve time. The starting point for our analyses is the prespective that results from combining the following (widely held) views: 1) certain voting models and planning procedures can be interpreted as being “non-tatonnement” or “sequential” processes (where each policy in the sequence that is generated is actually experienced by voters or consumers) and 2) an alternative being Pareto optimal in any given period (“temporal Pareto optimality”) is the appropriate efficiency criterion only if the alternative is the final outcome from a tatonnement process-and that, otherwise, one should examine the efficiency of the entire path (using “intertemporal Pareto optimality”). Our first observation about the planning literature is that is has (by and large) neglected the efficiency criterion that is appropriate for the discrete-time procedures that can be interpreted as “non-tatonnement” or “sequential” processes-and that, what's more, such trajectories will (in general) fail to meet this criterion. Our second observation identifies some results that can be used to establish that some of these trajectories will at least be “ultimately” intertemporally Pareto optimal. In our discussion of voting theory, we review Buchanan's opposition to requiring (social) choice consistency for voting procedures-and his argument for this position on (Pareto) efficiency grounds. We then consider voting procedures that can be interpreted as “non-tatonnement” or “sequential” processes and arrive at the conclusion that, in these cases, (i) majority rule cycles are intertemporally Pareto inefficient and (ii) achieving intertemporal Pareto optimality requires choice consistency. We then go on to show that related observations apply to Kramer's normative conclusions about his dynamical model of political equilibrium — and identify some further references where similar observations apply. In the final part of our discussion of voting models, we arrive at the further conclusion that, in the most relevant cases, a trajectory that stays in the temporal Pareto set is not necessarily more desirable (on efficiency grounds) than one that doesn't.