The provision of information, no matter how objective, influences power relationships in an economy. Thus, scientific activity is non-neutral in its effects on the outcome of economic interaction. Therefore the researcher and his host institution cannot avoid moral choices as to what research is performed, what information is provided, and to what use that information is put.

Economic Welfare and Welfare Economics

Information, Power and Academic Responsibility

The economic theory of the second best has been an analytical staple of welfare economics and policy analysis since Lipsey and Lancaster (1956) set forth the idea. That theory challenged the then standard claim that removing violations of the necessary conditions for a competitive equilibrium would be Pareto efficient. According to second best theory, if two or more violations of those conditions exist, there can be no assurance that removing one violation will be Pareto efficient. Indeed, adding further violations could be Pareto superior. Second best theory is now widely ensconced throughout policy analysis; however, that theory amounts to filling imaginary economic boxes, to recur to a theme J. H. Clapham (1922) once advanced about the use of increasing and decreasing returns in policy analysis. Second best theory is a feature of a particular theoretical model that might be useful for blackboard demonstrations but which is incapable of advancing the analysis of public issues which require plausible and not demonstrative reasoning.

background

Welfare Economics and Second-Best Theory: Filling Imaginary Economic Boxes

Since the beginnings of the efforts of economists to give their discipline scientific grounding, economists have thought their theoretical efforts had relevance for addressing significant public issues. While the classical economists generally supported what Adam Smith described as the “system of natural liberty,” those economists also weighed in on numerous issues of public discussion. The tenor and substance of those efforts is set forth wonderfully by Lionel Robbins (1952) and Warren Samuels (1966). While the analytical default setting of those economists was to support the system of natural liberty, they also recognized the value of sound public policy in supporting that system. The classical economists thought that there could be publicly beneficial activities that the system of natural lib erty would be unlikely to do well in providing. They also thought that there were activities provided through commercial transactions that could wreak significant effects on bystanders to those transactions. The amount of education acquired within a society was one such can didate (West 1965), with the care of the poor being another (Himmelfarb 1983). In such matters as these, the classical econo mists engaged in strenuous debate and discussion that served as a forerunner to the development of welfare economics during the 20th century.

Este trabajo contiene alguna adaptacion de "Banca central, curso forzoso y convertibilidad", presentado por el autor en diciembre de 1996 en la Academia Nacional de Ciencias de Buenos Aires.

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Economic Welfare and Welfare Economics

Citations

Information, Power and Academic Responsibility

Welfare Economics and Second-Best Theory: Filling Imaginary Economic Boxes

Welfare Economics and Second-Best Theory: Filling Imaginary Economic Boxes

La moneda en una sociedad abierta

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