Optimality and the Theory of Value

Abstract

This paper presents two, mutually dual, optimization principles, termed the zero-maximum principle and the zero-minimum principle, respectively, that characterize economic equilibria. The first of these principles states an equivalence between equilibrium allocations and allocations that maximize total societal benefit and make that benefit zero. The second principle states an equivalence between equilibrium price vectors and price vectors that minimize the total economic surplus and make that surplus zero. The two principles provide new characterizations of equilibrium in private ownership economies and a new avenue for a proof of the fundamental existence theorem for such equilibria. Journal of Economic Literature Classification Number: D50