first best

alternative first-best

1. not comparableeconomicsCharacterized by all optimality conditions being satisfiable.

   Without a tariff, the competitive equilibrium outcome coincides with the first best allocation.

   2025 May 29, Iván Werning, Guido Lorenzoni, Veronica Guerrieri, “Tariffs as Cost-Push Shocks: Implications for Optimal Monetary Policy”, in NBER Working Paper Series, number 33772, page 5

   1 more example

   Here the government should avoid any policy that affects the workers' decision rules since it would harm efficiency, and the first-best way of pursuing distributional goals is through lump-sum transfers.

   2018, Lars Ljungqvist and Thomas J. Sargent, Recursive macroeconomic theory, 4th edition, MIT Press, page 200

plural first bests · alternative first-best

1. economicsA situation where all optimality conditions are satisfied.