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Applied and bridge studies study record
Methods & measurementThe Efficient Markets Welfare Exclusion Theorem: Informational Efficiency, Allocative Welfare, and the Price of Everything Except the Cost
STATUS · Manuscript in progressSSRN · Not yet posted
MECHANISM
Identify the incentive structure and the condition that would falsify the claim.
RULE CHANGE
Read the intervention only after the paper shows how the current payoff space fails to support system welfare.
READER USE
Use the summary to see where private gain creates system exposure, then check the study record.
Contribution — what this adds to the conversation
Provides a formal theorem with welfare decomposition, three propositions, empirical calibrations across SAPM domains, and connections to existing literature (Grossman-Stiglitz, Arrow-Debreu, Stiglitz). The contribution is analytical and synthetic.
WHAT'S NEW · No prior paper formally decomposes EMH into informational welfare and allocative welfare, identifies three independently sufficient channels for divergence, or proves instrument complementarity. The theorem is original and non-obvious.
The paper derives the Efficient Markets Welfare Exclusion Theorem, showing that informationally efficient prices are welfare-optimal only under conditions that fail in every real market. The welfare decomposition identifies three channels—externality exclusion, market incompleteness, and adverse-selection transfers—through which informational efficiency and allocative welfare diverge. No single instrument closes all three channels; welfare-complete capital allocation requires coordinated policy.