Answer to Question #250670 in Economics for Neetesh

Question

Evaluate this statement by Goodin in 1995 in reference to the theory of second best and share your opinion on the validity of this statement.

'The same [lesson from the car case] applies [. . . ] to our social and political prescriptions. In the best of all possible worlds, we would like all of our ideals to be realized simultaneously. [. . . ] Ideally, we would like to attain liberty, equality, fraternity and material prosperity, all at one and the same time; but the classic trio might prove sociologically feasible only under conditions of severe material scarcity'. (Goodin, 1995, 53)

Answer 1

The second best theory concludes that if, for some reason, one of the efficiency conditions is violated, then the result that is preferable in terms of maximizing the social welfare function can be achieved if the other efficiency conditions are violated, even if they are achievable.

In this statement, the difference between ideal and real conditions is considered, which is quite natural.