Disproof of Fundamental Theorem #1

	A	B	C	D	E	F	H	I
1	Disproof of First Fundamental Welfare Theorem
2	The excel version of this spreadsheet can be copied by						clicking here.
3
4		Assumptions:
5	1	Each person is endowed with 10 units of effort per day.
6	2	One unit of effort produces one banana.
7	3	The size of your house is H = sqrt(10 Eh), where Eh is the daily effort to build and maintain the house.
8	4	Each person's utility is U = H + B + Pride, where B = bananas/day.
9	5	Pride = 0.9*[H − Average(H)]
10	6	People can trade bananas for house-building effort.
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14		Find Neoclassical (Optimal) Equilibrium
15		Eh	H	B	Pride	U
16		2.4	4.90	7.6	0	12.499
17		2.5	5.00	7.5	0	12.500
18		2.6	5.10	7.4	0	12.499
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20		Unilateral Deviation from Optimal Outcome
21		Eh	H	B	Pride	U
22		5	7.07	5	2.07	14.142
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24		Competitive Equilibrium
25		Eh	H	B	Pride	U
26		8.9	9.43	1.1	-0.048	10.4864
27		9	9.49	1	0.000	10.4868	Equilibrium
28		9.1	9.54	0.9	0.047	10.4867	0.1	= Deviation
29		Change the Green "House Effort" (Eh) until
30		Neither higher nor lower Eh provides more utility for the individual
31
32		Note that the Competitive Equilbrium provides less utility (10.5) than the Neoclassical equilibrium (12.5)
33		So the Neoclassical equilibrium is inefficient, which contradicts the First Fundamental Welfare Theorem
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