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Poverty in spiral of economic efficiency

 §1. By some criteria related to Pareto efficiency, Social welfare is enhanced when no one become worse off and at least someone become better off. 

§2.  Suppose a condition where two person run the economy. One is employer and another a constant employee. Employer gives employee land and seed for agriculture production. Out of that production employee get 1/4 of output. First time period, employer gets 3/4 and spent 1/4 on seed, consume 1/4 and store 1/4. At beginning of second period employee has nothing and employer has +1/4 wealth and land. With additional capital of 1/4 and labor of employee new income is generated. Now again 1/4 is given to employee but this time more than previous 1/4 is gained and may be stored by employee too. 

§3. In long run, employer has wealth enough to influence the demand of any product by having more endowment  and employee  must follow that price. I.e. employer not only get what he wants but also hike price in the process which will make the employee or less capital owner in long run poor as he can’t afford or purchase less as he become relatively poor. 

§4. Now to follow Pareto efficiency, nobody should be worse off i.e. employer too should accumulate more. More, because nothing is constant and to maintain previous constant more must be made. By §3 we see that someone who is causing downfall of social welfare is again seen as someone to be maintained for his wealth or better off and smaller change in poorer is equally valid. 

§5. Here, It is my inability to see the reasoning to enhance social welfare by following this social procedures or understanding. 

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