Discuss the second welfare theorem. How can societies use competitive markets to achieve both efficiency and equity?

What will be an ideal response?

The second welfare theorem tells us that every Pareto efficient allocation is a competitive equilibrium for some initial allocation of resources and it suggests that, in principle, societies can use competitive markets to achieve both efficiency and equity. If a competitive outcome is inequitable, the problem is with the initial distribution of resources, not the market institution. If society can redistribute those resources in an equitable manner, competitive markets will deliver the most equitable Pareto efficient allocation. Such redistributions include lump-sum transfers.