Theory of Second Best

Discipline: Economics

Proposed by Canadian economist RICHARD LIPSEY (1928-1980) and Australian economist KELVIN LANCASTER (1924-1999), theory of second best assumes that if one of the conditions necessary to achieve Pareto-optimality is missing then the 'second best' position can only be reached by departing from all the other Paretian conditions.

Also see: pareto efficiency

Source:
R G Lipsey and K Lancaster, 'The General Theory of Second Best', Review of Economic Studies, vol. XXIV (October, 1956) 11-32

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