Abstract:
Most economists know that given a number of alternative techniques
for producing m goods, no more than m techniques need be employed to
insure efficient production. Similarly, the optimal solution to a linear
programming problem involving m resource constraints involves no
more than m control variables assuming positive values. This paper
establishes a similar theorem: a Pareto improvement in an exchange
economy with m commodities requires the active participation of no more
than m traders. If, in a world characterized by positive information and
transactions costs, the achievement of Pareto improvements is inversely
related to the number of individuals whose cooperation is required, then
our result suggests that Pareto efficiency is more likely than one might
otherwise suspect....
