Demonstrating inefficiency in overlapping generations models

We find for overlapping generations models competitive equilibria that are not only Pareto inefficient, but for which every allocation that agrees with the equilibrium in the first period is also Pareto inefficient. That novel additional condition implies that a policy restoring Pareto efficiency is urgent (must start in the first period), and observing just the first period of the equilibrium allocation demonstrates the Pareto inefficiency of the entire allocation. •Demonstrating inefficiency is possible in some overlapping-generations models.•Knowing first period consumption may be sufficient to demonstrate inefficiency.•Demonstrating inefficiency implies policy intervention is urgent.•Demonstrating inefficiency is impossible in some special cases.•Perturbing special cases can make demonstrating inefficiency possible again.