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Efficiency and equity in a socially-embedded economy

Author

Listed:
  • Marc Fleurbaey

    (Paris School of Economics, CNRS)

  • Ravi Kanbur

    (Cornell University)

  • Dennis Snower

    (Global Solutions Initiative, INET Oxford, UCL and Brookings)

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.

Suggested Citation

  • Marc Fleurbaey & Ravi Kanbur & Dennis Snower, 2025. "Efficiency and equity in a socially-embedded economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 79(1), pages 1-56, February.
    • Handle: RePEc:spr:joecth:v:79:y:2025:i:1:d:10.1007_s00199-023-01546-5
    DOI: 10.1007/s00199-023-01546-5
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    More about this item

    Keywords

    Equilibrium; Social interactions; Efficiency; Equity; Externalities;
    All these keywords.

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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