Simple Pareto-Improving Policies

Pareto improvements that require no information about individual characteristics are analyzed. Initially, equilibrium must be production inefficient. After the policy change, consumer prices differ from producer prices, but allocations, although second-best, are Pareto superior and production efficient. Policy implementation is modeled as a dynamical system that governs aggregate consumer wealth, producer prices, and production levels. With knowledge of the maximum feasible level of consumer wealth and no other information, a policymaker can choose policy rules such that this system converges globally to the targeted equilibrium. With knowledge of only the aggregate income effect, local convergence is achievable. Journal of Economic Literature Classification Numbers: D51, D60, P11.