Theory of the second best

In economics, the theory of the second best concerns the situation when one or more optimality conditions cannot be satisfied. The economists Richard Lipsey and Kelvin Lancaster showed in 1956, that if one optimality condition in an economic model cannot be satisfied, it is possible that the next-best solution involves changing other variables away from the values that would otherwise be optimal. Politically, the theory implies that if it is infeasible to remove a particular market distortion, introducing a second (or more) market distortion may partially counteract the first, and lead to a more efficient outcome.

Implications

In an economy with some uncorrectable market failure in one sector, actions to correct market failures in another related sector with the intent of increasing economic efficiency may actually decrease overall economic efficiency. In theory, at least, it may be better to let two market imperfections cancel each other out rather than making an effort to fix either one. Thus, it may be optimal for the government to intervene in a way that is contrary to usual policy. This suggests that economists need to study the details of the situation before jumping to the theory-based conclusion that an improvement in market perfection in one area implies a global improvement in efficiency.

Second Best (film)

Second Best is a 1994 British film produced by Sarah Radclyffe and directed by Chris Menges. It closely follows the 1991 novel of the same name by David Cook, who also wrote the screenplay.

Plot

Graham Holt (William Hurt) is a single man aged 42, who attempts to adopt a 10-year-old boy. Graham is a sub-postmaster in Warwickshire, England. James Lennards (Chris Cleary Miles) is a disturbed child brought up in care. Graham wants a son, but James doesn't want another father.

Graham Holt's emotional development has been smothered by his protective parents. His mother has died and he has to care for his bed-ridden father who has had a stroke.

James has been shunted from care home to foster home, causing disruption and being unable to relate to women. He only has a vague memory of his mother when he was aged 3, but has a vivid and romantic image of his father. James' father is in prison and has spun tales of him being a mercenary in the few times they've spent together on the run.