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Theory of the second best - Wikipedia

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In welfare economics, the theory of the second best (also known as the general theory of second best or the second best theorem)[1] concerns the situation when one or more optimality conditions cannot be satisfied. The economists Richard Lipsey and Kelvin Lancaster showed in 1956, that if one optimality condition in an economic model cannot be satisfied, it is possible that the next-best solution involves changing other variables away from the values that would otherwise be optimal.[2] Politically, the theory implies that if it is infeasible to remove a particular market distortion, introducing one or more additional market distortions in an interdependent market may partially counteract the first, and lead to a more efficient outcome.[3] In an economy with some uncorrectable market failure in one sector, actions to correct market failures in another related sector with the intent of increasing economic efficiency may actually decrease overall economic efficiency. In theory, at least,

Theory of the second best - Wikipedia Jump to content From Wikipedia, the free encyclopedia Branch of economics studying next-best alternatives "Second best" redirects here. For the films, see Second Best (1994 film) and Second Best (2004 film) . In welfare economics , the theory of the second best concerns the situation when one or more optimality conditions cannot be satisfied. [ 1 ] The economists Richard Lipsey and Kelvin Lancaster showed in 1956 that if one optimality condition in an economic model cannot be satisfied, it is possible that the next-best solution involves changing other var

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