Capital Wealth Inequality and Public Bads: A Mathematical Analysis

Abstract

In A Future for Socialism (1994), John Roerrre'r argues that the highly unequal distribution of capital wealth under contemporary capitalism results in a level of public bads (e.g., environmental degradation) higher than that which would be preferred by the large majority of the population. This contention is examined using an alternative formal model, of arguably greater economic content and realism, from which the result is obtained that the household's share of capital property return has an uncertain effect on its preferred level of the public bad. In the CES special case, the effect of household capital wealth on its preferred level of public bad is determined by the elasticities of substitution in the production and utility functions.Distribution; Wealth; Inequality