| By: |
John E. Roemer (Dept. of Political Science & Cowles Foundation, Yale University) |
| Abstract: |
Humans cooperate a great deal in economic activity, but our two major models
of equilibrium – Walrasian competitive in markets and Nash in games – portray
us as only non-cooperative. In earlier work, I have proposed a model of
cooperative decision making (Kantian optimization); here, I embed Kantian
optimization in general equilibrium models and show that ‘Walras-Kant’
equilibria exist and often resolve inefficiencies associated with income
taxation, public goods and bads, and non-traditional firm ownership, which
typically plague models where agents are Nash optimizers. In four examples,
introducing Kantian optimization in one market – often the labor market –
suffices to internalize externalities, generating Pareto efficient equilibria
in their presence. The scope for efficient decentralization via markets
appears to be significantly broadened with cooperative behavior. |
| Keywords: |
Kantian optimization, Cooperation, General equilibrium, Market socialism, Global emissions control, Worker-owned firms, Externalities, Public goods |
| JEL: |
D50 D60 D62 D70 D91 E19 H21 H23 H41 |
| Date: |
2017–08 |
| URL: |
http://d.repec.org/n?u=RePEc:cwl:cwldpp:2098&r=res |