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The Genealogy of Modern Theoretical Public Economics: From First Best to Second Best

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  • Roger Guesnerie

Abstract

The development of second best modelling in the seventies has shaped modern theoretical public economics. The paper discusses some key changes in the economists' conceptions. The first two sections examine the efficiency- equity dilemma. The study of non convexities has shown that counterintuitive "efficiency enhancing" income redistribution might occur. The introduction of asymmetric information has shed doubts on virtues of lump-sum compensation. The last sections focus on the intricate geometry of second best optimisation and the ambiguous value of the signals provided by the price system outside a first best world.

Suggested Citation

  • Roger Guesnerie, 1994. "The Genealogy of Modern Theoretical Public Economics: From First Best to Second Best," CESifo Working Paper Series 76, CESifo.
    • Handle: RePEc:ces:ceswps:_76
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    2. Carmona, Miguel, 2010. "The regulatory function in public-private partnerships for the provision of transport infrastructure," Research in Transportation Economics, Elsevier, vol. 30(1), pages 110-125.
    3. Berliant, Marcus & Gouveia, Miguel, 2022. "On the Political Economy of Nonlinear Income Taxation," MPRA Paper 113140, University Library of Munich, Germany.
    4. Zsolt Becsi, 1999. "Heterogeneity and the welfare cost of dynamic factor taxes," FRB Atlanta Working Paper 99-2, Federal Reserve Bank of Atlanta.
    5. Marcus Berliant & John O. Ledyard, 2014. "Optimal Dynamic Nonlinear Income Taxes with No Commitment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(2), pages 196-221, April.
    6. Jean Charles Hourcade & Franck Lecocq, 2003. "Equitable Provision of Long-Term Public GoodsThe role of Negotiation Mandates," CIRED Working Papers halshs-00000968, HAL.
    7. David, Laurent & Le Breton, Michel & Merillon, Olivier, 2007. "Kolm as a Contributor to Public Utility Pricing, Second Best Culture and the Theory of Regulation," IDEI Working Papers 490, Institut d'Économie Industrielle (IDEI), Toulouse.
    8. Rodrigo Nobre Fernandez & André Carraro & Gabrielito Menezes & Giácomo Balbinotto Neto & Eduardo Tillmann, 2014. "Design Contract For Public-Privatepartnerships: A Theoretical Model For Brazilian Hospitals," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 062, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    9. Edoardo Marcucci, 1999. "Road Pricing: Old Beliefs, Present Awareness and Future Research Patterns," Working Papers 1999.4, Fondazione Eni Enrico Mattei.
    10. Peaucelle, Irina, 2002. "Capital social et anthroponomie," CEPREMAP Working Papers (Couverture Orange) 0204, CEPREMAP.

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