
Accession Number : AD0284782
Title : WELFARE ECONOMICS AND THE THEORY OF SECOND BEST
Corporate Author : YALE UNIV NEW HAVEN CT COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
Personal Author(s) : DAVIS, OTTO A. ; WHINSTON, ANDREW B.
Report Date : 20 SEP 1962
Pagination or Media Count : 1
Abstract : Conditions are demonstrated under which a violation of one Pareto condition means that it is socially desirable that certain other of the Paretian conditions be violated. The commonly held interpretation of the LipseyLancasterassified report DESCRIPTORS: *Economics, Theory, Mathematical analysis, Functions, Partial differential equations, Decision making. Identifiers: Pareto condition (Economics), Theory of second best, Welfare economics. Conditions are demonstrated under which a violation of one Pareto condition means that it is socially desirable that certain other of the Paretian conditions be violated. The commonly held interpretation of the LipseyLancaster theorem  that a violation of one Pareto condition means that none of the remaining Pareto conditions is desirable  is dispelled. The approach is somewhat similar to that used by Lipsey and Lancaster in that the method of maximinization subject to constraints is used. It is demonstrated that the LipseyLancaster formulation of the secondbest problem introduces extraneous considerations, does not provide adequate 'guidelines' for policy applications, and leads, at the very best, to misinterpretations of the meaning of their theorem. (Author)
Descriptors : *ECONOMICS, DECISION MAKING, FUNCTIONS(MATHEMATICS), MATHEMATICAL ANALYSIS, PARTIAL DIFFERENTIAL EQUATIONS, THEORY.
Distribution Statement : APPROVED FOR PUBLIC RELEASE