Distinguished Lecture on Economics in Government: The Private Uses of Public Interests: Incentives and Institutions
[Joseph Stiglitz was a member of the Council of Economic Advisers from 1993-95, and chairman of the CEA from 1995 through February 1997.] Today, I want to share with you some of my thoughts about the possibilities and limitations of government. These thoughts are focused around a simple question: Why is it so difficult to implement even Pareto improvements? Working in Washington, I quickly saw that although a few potential changes were strictly Pareto improvements, there were many other changes that would hurt only a small, narrowly defined group (for example, increasing the efficiency of the legal system might hurt lawyers). But if everyone except a narrowly defined special interest group could be shown to benefit, surely the change should be made. In practice, however, "almost everyone" was rarely sufficient in government policy-making and often such near-Pareto improvements did not occur. My major theme will be to provide a set of explanations for why this might be so. I shall put forward four hypotheses in this lecture, each of which provides part of the explanation for the failure in at least one instance of a proposed Pareto improvement. These hypotheses, like much of the literature on government failures, focus on the role of incentives: how misaligned incentives can induce government officials to take actions that are not, in any sense, in the public interest.
Volume (Year): 12 (1998)
Issue (Month): 2 (Spring)
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References listed on IDEAS
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.:
- Farrell, Joseph, 1987.
"Information and the Coase Theorem,"
Department of Economics, Working Paper Series
qt1sc2r800, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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0401, National Bureau of Economic Research, Inc.
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- George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
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- Joseph E. Stiglitz, 1996. "Whither Socialism?," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691825, September.
- Stanley Fischer, 1996. "Why are central banks pursuing long-run price stability?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 7-34.
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