Thus, in most real world economies, the degree of these variations from ideal conditions must factor into policy choices. The Greenwald-Stiglitz Theorem, for example, states that in the presence of either imperfect information, or incomplete markets, markets are not Pareto efficient. These ideal conditions, however, collectively known as Perfect Competition, do not exist in the real world. There can be many possible Pareto efficient allocations of resources and not all of them may be equally desirable by society. However, Pareto efficiency is not necessarily the same thing as desirability or even more general definitions of 'efficiency' it merely indicates that no one can be made better off without someone being made worse off. The theorem supports a case for non-intervention in ideal conditions: let the markets do the work and the outcome will be Pareto efficient. The first theorem is often taken to be an analytical confirmation of Adam Smith's 'invisible hand' hypothesis, namely that competitive markets tend toward the efficient allocation of resources. Despite the apparent symmetry of the two theorems, in fact the first theorem is much more general than the second, requiring far weaker assumptions. The second states the converse, that any efficient allocation can be sustainable by a competitive equilibrium. The first states that any competitive equilibrium or Walrasian equilibrium leads to a Pareto efficient allocation of resources. The field of welfare economics is associated with two fundamental theorems: Fundamental Theorems There are two fundamental theorems of welfare economics.

Some people object to the idea of wealth redistribution because it flies in the face of pure capitalist ideals, but economists suggest that greater states of overall social good might be achieved by redistributing incomes in the economy”. Because different 'optimal' states may exist in an economy in terms of the allocation of resources, welfare economics seeks the state that will create the highest overall level of social welfare.

Welfare economics uses the perspective and techniques of microeconomics, but they can be aggregated to make macroeconomic conclusions. Welfare economics is a subjective study that may assign units of welfare or utility in order to create models that measure the improvements to individuals based on their personal scales. This relates to the study of income distribution and how it affects the common good. “.A branch of economics that focuses on the optimal allocation of resources and goods and how this affects social welfare Welfare economics analyzes the total good or welfare that is achieved at a current state as well as how it is distributed.

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