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Economic theory and the welfare state : a survey and interpretation

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  • Nicholas Barr
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    Abstract

    'I propose here the view that, when the market fails to achieve an optimal state, society will, to some extent at least, recognize the gap, and nonmarket social institutions will arise attempting to bridge it....' (Kenneth Arrow 1963, p. 947). 'Economic theorists traditionally banish discussions of information to footnotes. Serious consideration of costs of communication, imperfect knowledge ... would, it is believed, complicate without informing.... [T]his comforting myth is false. Some of the most important conclusions of economic theory are not robust to considerations of imperfect information' (Michael Rothschild and Joseph Stiglitz 1976, p. 629). 'That any sane nation, having observed that you could provide for the supply of bread by giving bakers a pecuniary interest in baking for you, should go on to give a surgeon a pecuniary interest in cutting off your leg, is enough to make one despair of political humanity' (George Bernard Shaw, The Doctor's Dilemma, 1911).

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    File URL: http://eprints.lse.ac.uk/279/
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    Bibliographic Info

    Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 279.

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    Date of creation: Jun 1992
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    Publication status: Published in Journal of Economic Literature, June, 1992, 30(2), pp. 741-803. ISSN: 0022-0515
    Handle: RePEc:ehl:lserod:279

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    Postal: LSE Library Portugal Street London, WC2A 2HD, U.K.
    Phone: +44 (020) 7405 7686
    Web page: http://www.lse.ac.uk/
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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Zvi Bodie, 1989. "Inflation Insurance," NBER Working Papers 3009, National Bureau of Economic Research, Inc.
    2. Wilson, Charles, 1977. "A model of insurance markets with incomplete information," Journal of Economic Theory, Elsevier, vol. 16(2), pages 167-207, December.
    3. Danziger, Sheldon & Haveman, Robert & Plotnick, Robert, 1981. "How Income Transfer Programs Affect Work, Savings, and the Income Distribution: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 19(3), pages 975-1028, September.
    4. Jayendu Patel & Richard J. Zeckhauser, 1987. "Treasury Bill Futures as Hedges Against Inflation Risk," NBER Working Papers 2322, National Bureau of Economic Research, Inc.
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    13. Collard, David A, 1983. "Economics of Philanthropy: A Comment," Economic Journal, Royal Economic Society, vol. 93(371), pages 637-38, September.
    14. Le Grand, Julian, 1978. "The Distribution of Public Expenditure: The Case of Health Care," Economica, London School of Economics and Political Science, vol. 45(178), pages 125-42, May.
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    17. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135.
    18. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
    19. Salop, Joanne & Salop, Steven, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 619-27, November.
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    21. Shavell, Steven, 1979. "On Moral Hazard and Insurance," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 541-62, November.
    22. Davis, Karen, 1989. "National Health Insurance: A Proposal," American Economic Review, American Economic Association, vol. 79(2), pages 349-52, May.
    23. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931.
    24. Posner, Richard A, 1975. "The Social Costs of Monopoly and Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 807-27, August.
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    Citations

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    Cited by:
    1. Härpfer, Marco & Cacace, Mirella & Rothgang, Heinz, 2009. "And fairness for all? Wie gerecht ist die Finanzierung im deutschen Gesundheitssystem? Eine Berechnung des Kakwani-Index auf Basis der EVS," Working papers of the ZeS 04/2009, University of Bremen, Centre for Social Policy Research (ZeS).
    2. F.L. MacKellar & T.Y. Ermolieva, 1999. "The IIASA Social Security Reform Project Multiregional Economic-Demographic Growth Model: Policy Background and Algebraic Structure," Working Papers ir99007, International Institute for Applied Systems Analysis.
    3. Nicholas Barr, 1993. "Income transfers in Russia : problems and some policy directions," LSE Research Online Documents on Economics 289, London School of Economics and Political Science, LSE Library.
    4. Waltraud Schelkle, 2012. "Collapsing worlds and varieties of welfare capitalism: in search of a new political economy of welfare," LSE Research Online Documents on Economics 53194, London School of Economics and Political Science, LSE Library.
    5. Keith Griffin, 2000. "Problems of Poverty and Marginalization," Working Papers wp51, Political Economy Research Institute, University of Massachusetts at Amherst.
    6. Dariusz Stanko, 2004. "Social Security in Theory and Practice: An Essay," Public Economics 0401007, EconWPA.
    7. Erling Barth & Karl O. Moene, 2009. "The Equality Multiplier," NBER Working Papers 15076, National Bureau of Economic Research, Inc.
    8. Rothgang, Heinz & Cacace, Mirella, 2005. "Fair financing in Germany's public health insurance: income-related contributions or flat premiums," TranState Working Papers 26, University of Bremen, Collaborative Research Center 597: Transformations of the State.
    9. Waltraud Schelkle, 2012. "Collapsing Worlds and Varieties of welfare capitalism: In search of a new political economy of welfare," LEQS – LSE 'Europe in Question' Discussion Paper Series 54, European Institute, LSE.
    10. Riboud, Michelle & Hoaquan Chu, 1997. "Pension reform, growth, and the labor market in Ukraine," Policy Research Working Paper Series 1731, The World Bank.
    11. Selén, Jan & Ståhlberg, Ann-Charlotte, 2000. "Survivor's Pension Rights and Wages," Working Paper Series 5/2000, Swedish Institute for Social Research.
    12. Vittas, Dimitri & Michelitsch, Roland, 1995. "Pension funds in Central Europe and Russia : their prospects and potential role in corporate governance," Policy Research Working Paper Series 1459, The World Bank.
    13. Augusztinovics, Mária, 1999. "Nyugdíjrendszerek és reformok az átmeneti gazdaságokban
      [Pension system and reforms in the transition economies]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 657-672.
    14. Olivia S. Mitchell, 1998. "Administrative Costs in Public and Private Retirement Systems," NBER Chapters, in: Privatizing Social Security, pages 403-456 National Bureau of Economic Research, Inc.
    15. Gál, Róbert Iván, 1996. "A társadalombiztosítási programok ösztönző hatásai
      [Incentive effects of social security programs: a survey]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 128-140.
    16. Eloranta, Jari, 2004. "WARFARE AND WELFARE? Understanding 19th and 20th Century Central Government Spending," The Warwick Economics Research Paper Series (TWERPS) 699, University of Warwick, Department of Economics.

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