Efficiency and equity in a socially-embedded economy

Marc Fleurbaey (), Ravi Kanbur () and Dennis Snower ()
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Marc Fleurbaey: Paris School of Economics, CNRS
Ravi Kanbur: Cornell University
Dennis Snower: Global Solutions Initiative, INET Oxford, UCL and Brookings

Economic Theory, 2025, vol. 79, issue 1, No 1, 56 pages

Abstract: Abstract A model that only focuses on economic relations, and in which efficiency and equity are defined in terms of resource allocation may miss an important part of the picture. We propose a canonical extension of the standard general equilibrium model that embeds economic activities in a larger game of social interactions. Such a model combines general equilibrium effects with social multiplier effects and considerably enriches the analysis of efficiency and equity. Efficiency involves coordination between economic and social interactions, may depend on social norms, and may strongly interact with the distribution of resources. Equity can be defined in a comprehensive, socioeconomic way, and a decomposition into an economic and a social component is possible.

Keywords: Equilibrium; Social interactions; Efficiency; Equity; Externalities (search for similar items in EconPapers)
JEL-codes: D50 D60 I31 Z13 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s00199-023-01546-5

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