Non-constant Returns, Pareto Optimality and Competitive Equilibrium

Competitive equilibrium is not Pareto optimal if returns to scale are not constant, except in special and accidental circumstances. This result is demonstrated using a classical production model; it holds quite generally and independently of all other sources of Pareto inefficiency, such as externalities, imperfect information and quantity constraints. It establishes a general and ubiquitous basis for critique of the 'invisible hand' ideology, which still dominates both the textbooks and wider reaches of social thought

Competitive equilibrium · Constant (computer programming · Econometrics · Economics · Externality · General equilibrium theory · Imperfect competition · Inefficiency · Mathematical economics · Microeconomics · Pareto principle · Production (economics · Returns to scale · Computer Science · Economic theories and models · Economic Theory and Institutions

• Theory of Production

  Open Access•Heinz D Kurz, Heinz-Dieter Kurz et al.•Theory of Production•1995

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• Increasing Returns and Economic Progress

  Allyn A Young•The Economic Journal•1928

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