IDEAS home Printed from https://ideas.repec.org/a/kap/itaxpf/v14y2007i4p349-364.html
   My bibliography  Save this article

Reflections on the general theory of second best at its golden jubilee

Author

Listed:
  • Richard Lipsey

    ()

Abstract

The origin of the second best article is described and criticisms assessed. Distortions making impossible the achievement of either first or second best optima are outlined. Attempts to establish the applicability of first best rules are criticised, as are general rules for making piecemeal efficiency improvements. Both often use models containing empirically invalid assumptions and a selected few of the full set of distortions. Practical policy advice requires more parochial objective functions than community welfare; must rely on formal and appreciative theory, empirical evidence, and large doses of judgment; and should concentrate on making piecemeal improvements in context-specific situations. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Richard Lipsey, 2007. "Reflections on the general theory of second best at its golden jubilee," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(4), pages 349-364, August.
  • Handle: RePEc:kap:itaxpf:v:14:y:2007:i:4:p:349-364
    DOI: 10.1007/s10797-007-9036-x
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10797-007-9036-x
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Robin Boadway, 1997. "Public Economics and the Theory of Public Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 753-772, November.
    2. Curtis Eaton, B. & Lipsey, Richard G., 1989. "Product differentiation," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 12, pages 723-768 Elsevier.
    3. Lipsey, Richard G. & Carlaw, Kenneth I. & Bekar, Clifford T., 2005. "Economic Transformations: General Purpose Technologies and Long-Term Economic Growth," OUP Catalogue, Oxford University Press, number 9780199290895.
    4. Robin Boadway, "undated". "The Role of Second-Best Theory in Public Economics," EPRU Working Paper Series 95-06, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    5. P. Bohm, 1967. "On the Theory of "Second Best"," Review of Economic Studies, Oxford University Press, vol. 34(3), pages 301-314.
    6. Harberger, Arnold C, 1971. "Three Basic Postulates for Applied Welfare Economics: An Interpretive Essay," Journal of Economic Literature, American Economic Association, vol. 9(3), pages 785-797, September.
    7. Eaton, B Curtis & Lipsey, Richard G, 1976. "The Non-Uniqueness of Equilibrium in the Loschian Location Model," American Economic Review, American Economic Association, vol. 66(1), pages 71-93, March.
    8. Eaton, B Curtis & Lipsey, Richard G, 1978. "Freedom of Entry and the Existence of Pure Profit," Economic Journal, Royal Economic Society, vol. 88(351), pages 455-469, September.
    9. L. Athanasiou, 1966. "Some Notes On The Theory Of Second Best," Oxford Economic Papers, Oxford University Press, vol. 18(1), pages 83-87.
    10. O. A. Davis & A. B. Whinston, 1967. "Piecemeal Policy in the Theory of Second Best," Review of Economic Studies, Oxford University Press, vol. 34(3), pages 323-331.
    11. McKee, Michael & West, Edwin G, 1981. "The Theory of Second Best: A Solution in Search of a Problem," Economic Inquiry, Western Economic Association International, vol. 19(3), pages 436-448, July.
    12. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
    13. Hatta, Tatsuo, 1986. "Welfare effects of changing commodity tax rates toward uniformity," Journal of Public Economics, Elsevier, vol. 29(1), pages 99-112, February.
    14. Faith, Roger L & Thompson, Earl A, 1981. "A Paradox in the Theory of Second Best," Economic Inquiry, Western Economic Association International, vol. 19(2), pages 235-244, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Richard G. Lipsey, 2012. "A critique of Ng's third-best theory," Discussion Papers dp12-02, Department of Economics, Simon Fraser University.
    2. repec:bla:pacecr:v:22:y:2017:i:2:p:167-177 is not listed on IDEAS
    3. Lawson, Nicholas, 2015. "Social program substitution and optimal policy," Labour Economics, Elsevier, vol. 37(C), pages 13-27.
    4. repec:bla:pacecr:v:22:y:2017:i:2:p:178-188 is not listed on IDEAS
    5. repec:bla:pacecr:v:22:y:2017:i:2:p:229-248 is not listed on IDEAS
    6. Ugur, Mehmet, 2009. "Liberalisation in a world of second best: evidence on European network industries," MPRA Paper 17873, University Library of Munich, Germany, revised 13 Oct 2009.
    7. Wai Chiu Woo, 2010. "The Theory of Second Best and Third Best," Chapters,in: Famous Figures and Diagrams in Economics, chapter 38 Edward Elgar Publishing.
    8. repec:bla:pacecr:v:22:y:2017:i:2:p:147-154 is not listed on IDEAS
    9. Byrnes, Liam & Brown, Colin, 2015. "Australia’s renewable energy policy: the case for intervention," MPRA Paper 64977, University Library of Munich, Germany.
    10. Richard E. Wagner, 2015. "Welfare Economics and Second-Best Theory: Filling Imaginary Economic Boxes," Cato Journal, Cato Journal, Cato Institute, vol. 35(1), pages 133-146, Winter.
    11. Richard G. Lipsey & Murray G. Smith, 2011. "Multilateral versus Regional Trading Arrangements: Substitutes or Complements?," Chapters,in: International Handbook on the Economics of Integration, Volume I, chapter 3 Edward Elgar Publishing.
    12. M. Molinari, 2014. "A Second Best Theory of Institutional Quality," Public Organization Review, Springer, vol. 14(4), pages 545-559, December.
    13. Richard G. Lipsey, 2013. "Some contentious issues in theory and policy in memory of Mark Blaug," Chapters,in: Mark Blaug: Rebel with Many Causes, chapter 6, pages 31-62 Edward Elgar Publishing.
    14. Richard G. Lipsey, 2009. "Some Legacies of Robbins' "An Essay on the Nature and Significance of Economic Science"," Economica, London School of Economics and Political Science, vol. 76(s1), pages 845-856, October.
    15. repec:bla:pacecr:v:22:y:2017:i:2:p:189-212 is not listed on IDEAS

    More about this item

    Keywords

    Second best; Piecemeal policies; Context-specific policies; Distortions; Efficiency conditions; Optimality conditions; D60;

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:itaxpf:v:14:y:2007:i:4:p:349-364. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.