Equity and free market efficiency

Abstract

The question of an equitable distribution of the national "Economic pie" is by no means new. Modern proponents of a more equitable distribution (vis-à-vis current distribution) advocate the use of government coercive power to affect such a distribution. The purpose of this research is to examine the implementations of such a policy in the context of spatial economic theory and F. A. Hayek's Rule of Law philosophy. The economic impact of a government policy which has as its goal, distributive justice has by no means been satisfactory or completely explicated. Such policy requires the government to intervene in the market place and such intervention is not costless. Relying on an entrepreneurial utility function derivable from Professor Greenhut's spatial economic theory, we can better explicate these costs. This utility function specifies that profit (Yi) as well as energy expenditures (yi) are necessary and sufficient conditions for entrepreneurial utility maximization. When the government uses its coercive power to affect distributional justice some enforcement resources are required to insure that the state deserved product mix is actually produced. A crude measure of the volume of enforcement resources needed to affect the state product mix (between the level of consumer goods, C (subscript co), and consumer goods planned, the political authority C(subscript so) may be show to be [equation in PDF] where M is the level of enforcement resources needed to insure the state product mix..