# Social planner

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{{Short description|Decision-maker who attempts to maximize social welfare}}
{{More citations needed|date=December 2009}}
In [welfare economics](/source/welfare_economics), a '''social planner''' is a hypothetical decision-maker who attempts to maximize some notion of [social welfare](/source/social_welfare_function). The planner is a fictional entity who chooses allocations for every agent in the economy—for example, levels of consumption and leisure—that maximize a [social welfare function](/source/social_welfare_function) subject to certain constraints (e.g., a physical resource constraint, or [incentive compatibility](/source/incentive_compatibility) constraints). This so-called '''planner's problem''' is a mathematical [constrained optimization](/source/constrained_optimization) problem. Solving the planner's problem for all possible '''Pareto weights''' (i.e., weights on each type of agent in the economy) yields all [Pareto efficient](/source/Pareto_efficiency) allocations.

== Connection with the fundamental welfare theorems ==
Any Pareto efficient allocation is a solution to a planner's problem. However, the planner is a purely fictional entity; solving the planner's problem requires knowledge of consumers' preferences and all physical resource constraints in the economy. Thus, a natural question is whether a decentralized market could implement a Pareto efficient allocation, or conversely, whether the outcomes from a decentralized market are Pareto efficient. The [fundamental theorems of welfare economics](/source/fundamental_theorems_of_welfare_economics) answer these questions, under certain key assumptions.<ref>{{harvnb|Jehle|Reny|2011}}</ref>

[The first welfare theorem](/source/Fundamental_theorems_of_welfare_economics) states that, under certain conditions (for example, if there are no [externalities](/source/Externality)), if an allocation and a set of prices constitute a [competitive equilibrium](/source/competitive_equilibrium), then the allocation is [Pareto efficient](/source/Pareto_efficiency).

[The second welfare theorem](/source/Fundamental_theorems_of_welfare_economics) states that, under certain conditions, any Pareto efficient allocation can be decentralized as a competitive equilibrium.

==See also==
*[Pareto efficiency](/source/Pareto_efficiency)
*[Social welfare function](/source/Social_welfare_function)
*[Welfare economics](/source/Welfare_economics)
*[Constrained optimization](/source/Constrained_optimization)
*[Production-possibility frontier](/source/Production-possibility_frontier)

== References ==
{{Reflist}}
*{{citation|last1=Jehle|first1=Geoffrey A.|last2=Reny|first2=Philip J.|edition=3rd|title=Advanced Microeconomic Theory|year=2011|publisher=Pearson|isbn=978-0-273-73191-7|chapter=Chapter 5: General Equilibrium}}
* {{citation|author-link=Andreu Mas-Colell|last1=Mas-Colell|first1=Andreu|first2=Michael D.|last2=Whinston|first3=Jerry R.|last3=Green|year=1995|title=Microeconomic Theory|chapter=Chapter 16: Equilibrium and its Basic Welfare Properties|publisher=Oxford University Press|isbn=0-19-510268-1|url=https://archive.org/details/isbn_9780198089537}}

{{DEFAULTSORT:Social Planner}}
Category:Welfare economics

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