Knowledge that Transforms

In a comment published in the Review of Economic Studies Professors Santoni and Church (1972) corrected a mathematical flaw which existed in Lipsey's and Lancaster's (1956) seminal article on the theory of second best. The correction of that error, although it had no effect on the statement of the general theorem of second best, had a significant impact on the necessary conditions for the attainment of the second best position. Professors Santoni and Church, however, in their analysis on the equivalence of first best and second best optimality conditions, missed a point which is important because it proves a theorem whose position in the literature of Welfare Economics goes back at least as far as Pigou (1932). We may paraphrase this theorem as follows. If there is a distortion in some sector of the economy, then the Pareto and second best solutions for the rest of the economy are equivalent if the marginal rate of substitution (transformation) between any two industries is equal to the marginal rate of distortion between these two industries. In this comment we will provide a rigorous proof of this theorem and also give an economic example which validates the theorem under quite general conditions. In formulating the proof we will employ the same notation as that employed by

Journal Article On Distribution According to Labour—A Concept of Fairness in Production Economies Get access Mikiro Otsuki Mikiro Otsuki Tohoku University Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 47, Issue 5, October 1980, Pages 945–958, https://doi.org/10.2307/2296924 Published: 01 October 1980 Article history Received: 01 May 1977 Accepted: 01 February 1980 Published: 01 October 1980

Journal Article Monopolistic Behaviour, Prices and Quantities Get access Xavier Freixas Xavier Freixas Université des Sciences Sociales, Toulouse Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 47, Issue 4, July 1980, Pages 747–753, https://doi.org/10.2307/2296940 Published: 01 July 1980 Article history Received: 01 September 1978 Accepted: 01 September 1979 Published: 01 July 1980

Raveendra N. Batra, Rama Ramachandran; Tariffs, The Terms of Trade and Domestic Prices in a Monetary Economy, The Review of Economic Studies, Volume 47, Is

Journal Article Algorithms for Social Choice Functions Get access Donald E. Campbell Donald E. Campbell Ontario Economic Council and University of Toronto Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 47, Issue 3, April 1980, Pages 617–627, https://doi.org/10.2307/2297312 Published: 01 April 1980 Article history Received: 01 June 1977 Accepted: 01 April 1979 Published: 01 April 1980

Journal Article A Neoclassical Model of the Dual Economy with Capital Accumulation in Agriculture Get access Masanori Amano Masanori Amano University of Tsukuba Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 47, Issue 5, October 1980, Pages 933–944, https://doi.org/10.2307/2296923 Published: 01 October 1980 Article history Received: 01 January 1979 Accepted: 01 February 1980 Published: 01 October 1980

Journal Article On the Possibility of Consistent Voting Procedures Get access Bhaskar Dutta Bhaskar Dutta University of Delhi Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 47, Issue 3, April 1980, Pages 603–616, https://doi.org/10.2307/2297311 Published: 01 April 1980 Article history Received: 01 June 1976 Accepted: 01 May 1979 Published: 01 April 1980

Journal Article Disaggregated Demand Analysis: The Estimation of a Class of Non-linear Demand Systems Get access S. E. Pudney S. E. Pudney London School of Economics Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 47, Issue 5, October 1980, Pages 875–892, https://doi.org/10.2307/2296919 Published: 01 October 1980 Article history Received: 01 September 1978 Accepted: 01 March 1980 Published: 01 October 1980

Journal Article Continuous Representation of Preferences Get access Graciela Chichilnisky Graciela Chichilnisky Columbia University and University of Essex Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 47, Issue 5, October 1980, Pages 959–963, https://doi.org/10.2307/2296925 Published: 01 October 1980 Article history Received: 01 January 1978 Accepted: 01 February 1980 Published: 01 October 1980