Impossibility of the Welfare Theorem

The Impossibility of the Welfare Theorem suggests that it is impossible to achieve a society where everyone's welfare can be maximized without sacrificing the welfare of someone else. In essence, while economic models can show efficient outcomes, they cannot guarantee that these outcomes also promote fairness or overall happiness for all individuals. Different preferences and needs mean that enhancing one person’s situation often comes at the expense of another’s. This highlights a fundamental tension in economics between efficiency (making the best use of resources) and equity (fair distribution of wealth and welfare).