The theory of a second-best solution

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The theory of a second-best solution concerns the events that happen when a condition for an optimal outcome isn't met. In that case a second-best solution should be sought. But the second-best solution isn't always the one where every other condition is met except the one missing to make the solution optimal. Thus, in order to get the second-best solution where one or more necessary conditions haven't been met, it isn't necessary, it is in fact a bad idea to try to keep the other, already met conditions. In other words, one should allow the market deficiencies to cancel themselves out. E.g. in a perfect competitive state the optimum is found if the price and border cost is equal in all market sectors. Should the price in a sector grow above the border costs, the second-best solution will, for example, require taxes to make the prices grow elsewhere, because that way the consumers' border decisions about the allocation of their budget to various products stay almost unchanged. After being brought up in the 1965 work by a Canadian, Richard Lipsey (born in 1928) and an Australian, Kelvin Lancaster (1924-1999), the theory was also used, except in economy, in the legislative sciences.