Preprint Article Version 1 Preserved in Portico This version is not peer-reviewed

Decentralized Decisions and Technological Progress: A Formal Proof

Version 1 : Received: 16 July 2021 / Approved: 21 July 2021 / Online: 21 July 2021 (15:20:38 CEST)

How to cite: Tao, Y. Decentralized Decisions and Technological Progress: A Formal Proof. Preprints 2021, 2021070499 (doi: 10.20944/preprints202107.0499.v1). Tao, Y. Decentralized Decisions and Technological Progress: A Formal Proof. Preprints 2021, 2021070499 (doi: 10.20944/preprints202107.0499.v1).

Abstract

This paper provides attempts to formalize Hayek’s theory of knowledge. It has been theoretically shown that exponential income distribution is a spontaneous order of the well-functioning market economy. We show that this theoretical result is supported by the empirical evidence from the United Kingdom and China. In particular, we empirically show how the income structure of China evolved towards an exponential distribution after the market-oriented economic reformation. Furthermore, we strictly prove that, if the income structure of an economy obeys an exponential distribution, the income summation over all households leads to an aggregate production function with Hicks-neutral-like technical progress, in which the technology factor is exactly equal to society’s information stock that is a result of combining all of decentralized decisions.

Subject Areas

Generalized Pareto distribution; Exponential income distribution; Technology factor; Information stock; Decentralized decisions

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