The Cass criterion, also known as the Malinvaud–Cass criterion, is a central result in theory of overlapping generations models in economics. It is named after David Cass. A major feature which sets overlapping generations models in economics apart from the standard model with a finite number of infinitely lived individuals is that the First Welfare Theorem might not hold—that is, competitive equilibria may be not be Pareto optimal. If p t {\displaystyle p_{t}} represents the vector of Arrow–Debreu commodity prices prevailing in period t {\displaystyle t} and if
∑ t = 0 ∞ 1 ‖ p t ‖ < ∞ , {\displaystyle \sum _{t=0}^{\infty }{\frac {1}{\|p_{t}\|}}<\infty ,}
then a competitive equilibrium allocation is inefficient.
References