This paper deals with the well known Basic Theorems of Welfare Economics from a view of Public Choice. The conventional Pareto Optimality of the Basic Theorems is defined by the only obligatory conditions. The changes from a society with no facultative conditions to that with both facultative and obligatory conditions are considered under the Theorems. But any changes except those from the existing rules and institutions are impossible in the real world. The First Basic Theorem is criticized from Buchanan's approach and the Second One is disapproved by allowing for Tullock's cost of transfers.
The extention of the conventional Pareto Optimality concept to the changes of rules and institutions are called as Buchanan Optimality. We consider some charactaristics of Buchanan Optimality and Public Choice approach compared to the conventional Pareto Optimality criterion.

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Stagflation is not a pure economic phenomenon but a socio-economic problem which cannot satisfactorily be explained by traditional economics. An application of the theory of public choice and externality will be helpful to elucidate the recent stagflation in the highly industrialized countries. Just as the increase of deficit in the public sector is explained by the public choice theory, stagflation can be analized by it. Cost-push stagflation may also be interpreted as a problem of negative externality or social costs as is suggested by Laurence S. Seidman, etc. If the joint decision agreed upon by both sides of industry causes serious externality, the social costs caused by it must be prevented or internalized.
The main procedures to prevent or internalize the social costs caused by excessive wage and price increases may be classified into the following categories which correspond to those of the anti-pollution policy.
1) Collective bargaining and “social contract” betweenn both sides of industry.
2) Giving incentive to wage restraint by subsidizing workers through income tax reduction, the improvement of social security benefits, etc.
3) Tax-based incomes policy-taxation on the excess wage increase above the guide line.
4) Direct incomes policy.
When 1) is not successful, procedures 2) and/or 3) or the combination of 2) and 3) are required to prevent or to internalize the possible social costs which will be caused by the excessive wage and price increase. Those procedures will also be helpful to prevent the zero-sum game and/or “prisoner's dilemma” into which collective bargaining tends to fall.
The rational expectation hypothesis assumes that economic agents behave rationally, while the “prisoner's dilemma hypothesis” assuumes that economic agents tend to fall into the most irrational situation. However, if there is sufficient communication and mutual interest betweenb oth sides of industry, it is reasonable to assume that “enlighted rational expectation” will be created. Incentive systems to induce“enlightened rational solutions” should also be introduced.

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The aims of this paper are to empirically analize the relations of macroeconomic factors to political situations, and to observe the synchronized fluctuation of macroeconomic variables and political time schedules.
For the sake of some conveniences of data collection and processing, we shall use the data of Post War economy and polity of Japan. We can give the counter example of Western Democratic Countries' experiences that the longrun upward trend of price index is allowable in myopic political situations created by self interested voters and voting maximizer.
Fortunately, in Japan the upward trend of price index is easily to be major political issue, then the policy maker must regulate the trend by functional economic policies. This means that the price stability of the economic situations are reinforced by these political characteristics of Japanese voters and political leaders. The works of this paper are to form the probabilistic voter's loss-function, theoretically and empirically, and to apply to political preference structure of representative voter.
The main conclusions are that voters in Japan form the elliptical political preference function and the political allowable range between the longrun price index and the rate of unemployment, and then the macroeconomic fluctuations may be forced to be stabilyzed by political time schedules.

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We argue in this paper that validity of discretionary macro-economic policy should be discounted from the point of view of politico-economics.
In section 2, We present a fundamental illustration, in which economic managers (bureaucrats) execute a feedback control of economic system and the incumbent party (polititians) pressures them. Particularly, we call the pressure“political noise”.
In sections 3, 4, 5 and 6, we formulate a model, and derive some propositions.
NOTATION:
Y (real national income)
p (rate of inflation)
p_e (expected rate of inflation)
m (increase rate of money supply)
U (Y, p) (evaluation function)
i (time preference rate)
ASSUMPTION:
(1) Y, p, p_e and m are twice differentiable with respect to the time.
(2) U₁>0
U is a strictly quasi-concave function.
∂ (-U₂/U₁) /∂p>0
(3) We assume an economic system described by the following equations.
Y=YN+a (p-pe) ; YN, a>0
(aggregate supply function of the Lucas type)
p_e=b (p-pe) ; b>0
(adaptive expectation hypothesis)
p=m
(quantity theory of money)
(4) The increase rate of money supply is a control variable of the economic system.
PROBLEM: The economic manager would consider the following problem.
Max_m∫^+∞₀U(Y, p)e^-itdt
subject to Y=Y_N+a(p-p_e)
p_e=b(p-p_e)
p=m.
THEOREM: The steady state solution of PROBLEM has the following properties.
(1) Y^*=Y_N
(so-called“normal output level”)
(2) p^*→0 as i→0
(3)dp^*/di>0
(4)-U₁/U₂(Y^*, p^*)→1/a as i→+∞
Politicians are generally more myopic than bureaucrats because of the existence of elections, so that the incumbent party would pressure economic managers into modifying their time preference rates. This mechanism inevitably accelerates inflation by the THEOREM. Hence we can conclude that discre-tionary macro-economic policy has a bias to-ward inflation in democratic systems. In particular, as it is plausible that political noise is increasing over the legislation period, this mechnism also suggests the existence of political business cycle.
By the way, the magnitude of inflation generated by political process would depend on the“autonomy”of bureaucratic organiza-tion. Therefore the difference in economic performance between Japan and the United States today may reflect the one in autonomy of civil service between the two. Namely, we can conjecture that economic manage-ments of the United States are too sensitive to the political noise to stabilize the economy.
In section 8, we discuss some policy im-plications in the context of theories of con-stitutional contract. Particularly we reevaluate the fixed control (as opposed to the feedback control), for instance, the Friedman's k% rule, as a second-best policy.

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