Socialism

Consider a society in which each individual can produce the same consumption good, like food, using a single input, like land. Each individual is characterized by her productivity. The higher an individual’s productivity, the more output she produces with any given amount of the input.

An economic system can be thought of as a rule that specifies the output produced by the entire society and the allocation of this output among the individuals as a function of the individuals’ productivities. Should individuals with high productivity get more output than ones with low productivity? Should two individuals with the same productivity receive the same amount of output? Should an increase in an individual’s productivity result in her receiving more output?

The design of an economic system requires an answer to such questions. The approach in this chapter (like those in Chapters 3 and 20) is axiomatic. The central result specifies conditions capturing efficiency and fairness that are satisfied only by an economic system that resembles the socialist ideal.