Cass criterion

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 represents the vector of Arrow–Debreu commodity prices prevailing in period t and if

∑ t = 0 ∞ 1 ∥ p t ∥ < ∞ .

then a competitive equilibrium allocation is inefficient.