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Information, Strategy and Public Policy

David Vines (Edited by), D Vines (Author), Andrew Stevenson (Edited by)

9780631176930, Wiley

Hardback, published 14 March 1991

184 pages
23.7 x 16.1 x 1.8 cm, 0.369 kg

In this volume, some of the world’s finest economists address a theme which is once again at the heart of both economic theory and international economic policy, namely the appropriate role for policy in a market economy. Can Adam Smith’s ‘invisible hand’ mechanism be expected to allocate resources efficiently to meet the needs of society and is the role of government therefore limited at best? The authors draw on recent theoretical advances in the study of imperfect information and strategic behaviour to argue that the models of classical welfare economics are insufficient as a framework for understanding modern market economics.

The first two chapters by Joseph Stiglitz and Frank Hahn represent assaults on the fundamental theorems of welfare economics: the notion of pareto-efficiency and the ability of the price mechanism to achieve it. Taking this as their lead, subsequent chapters focus on specific examples of market failure – the environment, the peristence of high levels of unemploement and the strategic behaviour of governments in the making of international economic policy.

The book represents a remarkable and accessible insight into the dilemmas of modern economics. It also demonstrates the fundamental role economic analysis has to play in the understanding of real problems and the formulation of appropriate policy.

Contributors

Partha Dasgupta Cambridge University and Stanford University

Frank Hahn Cambridge University

Edmond Malinvaud College de France

Kenneth Rogoff University of California at Berkeley

Andrew A. Stevenson University of Glasgow

Joseph E. Stiglitz Stanford University

David Vines University of Glasgow

Preface vii

Contributors viii

1 Introduction 1

2 The Invisible Hand and Modern Welfare Economics 12

3 The Welfare Economics of Market Economies 51

4 The Environment as a Commodity 71

5 Macroeconomics and Market Failures 104

6 Strategic Perspectives on Economic Policy 124

7 International Policy Cooperation, Exchange Rates and Industrial Policy 143

Index 169

Subject Areas: Business & management [KJ]

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