ABSTRACT
We have now completed our analysis of the stationary perfectly competitive equilibrium that is compatible with the extreme assumptions enumerated in Chapter I. It will be the purpose of later volumes to remove those assumptions and observe the effect of their removal upon the economic problems of society. As we have pointed out, many of the ultimate objectives of economic policy which we enumerated in our Introduction (pp. 14-17) cannot be discussed at all realistically until the assumptions of Chapter I have been relaxed. But there is one possible clash between ultimate objectives which our stationary equilibrium can illustrate—namely, the clash between ‘economic efficiency’ and ‘distributive justice’—a clash which remains basic to decisions about economic policy in the real world in which the strict assumptions of Chapter I are no longer relevant. Let us define an inefficient situation as one in which it would be possible to make one citizen better off without making any other citizen worse off. We may then express the clash between ‘economic efficiency’ and ‘distributive justice’ by saying that in the conditions laid down in Chapter I a policy of strict laissez-faire will generate competitive forces which will eliminate all economically inefficient situations, but that such a policy may at the same time result in a very undesirable distribution of income among the individual citizens.
