The first and second fundamental theorems of welfare economics are perhaps the most important justifications for the idea that free market outcomes can reach fair and efficient results. Roughly, the first fundamental theorem shows that all outcomes of a free market are efficient (putting aside the possibility of a market failure), and the second theorem says that any efficient outcome can be achieved by redistribution of allotments. Given the assumptions of a free market, no market failures, and redistribution of allotments, we can expect the economy to produce any fair and efficient outcome that we desire.
« Older It's a house blend | Teenage Teanga Newer »
This thread has been archived and is closed to new comments