A Dynamic Version of the Model with an Endogenous Social Power Structure

Abstract

In chapter 4 we presented a politico-economic model, which was built up from an elementary Keynesian income — expenditure model. Analyzing the public sector decision making process with the help of the interest function approach, we obtained behavioural equations for state expenditure, state employment, and the tax rate. These behavioural equations had an important role reserved for the so-called power coefficient δ, which represents the effective interest structure of society, I. e. the preferences of the various social classes for publicly vs privately supplied goods and services (ε_kg), weighted by the relative kg influence of these social classes on state behaviour (λ_k). While in chapter 4 the preferences of the social classes and the power structure of society were taken to be given and fixed, it seems particularly unwarranted to assume that the power distribution will indeed remain unchanged over time. The empirical application in chapter 5 was suggestive in this respect. Several factors were enumerated which may be expected to co-determine the relative influence of the social classes, such as their degree of organization, their financial means, their control over and the relative scarcity of the different factors of production. In chapter 2 — especially section 2.6 — we saw that it is quite a problem to arrive at an appropriate measurement and modelling of such factors.