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Economic theory and the welfare state : a survey and interpretation

  • Nicholas Barr
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    '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/
    File Function: Open access version.
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    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
    Date of revision:
    Publication status: Published in Journal of Economic Literature, June, 1992, 30(2), pp. 741-803. ISSN: 0022-0515
    Handle: RePEc:ehl:lserod:279
    Contact details of provider: 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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    1. Joanne Salop & Steve Salop, 1976. "Self-selection and turnover in the labor market," Special Studies Papers 80, Board of Governors of the Federal Reserve System (U.S.).
    2. Zvi Bodie, 1989. "Pensions as Retirement Income Insurance," NBER Working Papers 2917, National Bureau of Economic Research, Inc.
    3. 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.
    4. Wagstaff, Adam & van Doorslaer, Eddy & Paci, Pierella, 1989. "Equity in the Finance and Delivery of Health Care: Some Tentative Cross-country Comparisons," Oxford Review of Economic Policy, Oxford University Press, vol. 5(1), pages 89-112, Spring.
    5. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-83, May.
    6. Pauly, Mark V, 1974. "Overinsurance and Public Provision of Insurance: The Roles of Moral Hazard and Adverse Selection," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 44-62, February.
    7. 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.
    8. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931.
    9. Hellwig, Martin, 1987. "Some recent developments in the theory of competition in markets with adverse selection ," European Economic Review, Elsevier, vol. 31(1-2), pages 319-325.
    10. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
    11. Wilson, Charles, 1977. "A model of insurance markets with incomplete information," Journal of Economic Theory, Elsevier, vol. 16(2), pages 167-207, December.
    12. Sugden, Robert, 1982. "On the Economics of Philanthropy," Economic Journal, Royal Economic Society, vol. 92(366), pages 341-50, June.
    13. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135.
    14. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
    15. Collard, David A, 1983. "Economics of Philanthropy: A Comment," Economic Journal, Royal Economic Society, vol. 93(371), pages 637-38, September.
    16. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
    17. 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.
    18. Hochman, Harold M & Rodgers, James D, 1969. "Pareto Optimal Redistribution," American Economic Review, American Economic Association, vol. 59(4), pages 542-57, Part I Se.
    19. Blaug, Mark, 1976. "The Empirical Status of Human Capital Theory: A Slightly Jaundiced Survey," Journal of Economic Literature, American Economic Association, vol. 14(3), pages 827-55, September.
    20. James H. Stock & David A. Wise, 1988. "The Pension Inducement to Retire: An Option Value Analysis," NBER Working Papers 2660, National Bureau of Economic Research, Inc.
    21. Shavell, Steven, 1979. "On Moral Hazard and Insurance," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 541-62, November.
    22. Jayendu Patel & Richard J. Zeckhauser, 1987. "Treasury Bill Futures as Hedges Against Inflation Risk," NBER Working Papers 2322, National Bureau of Economic Research, Inc.
    23. Evans, R.G. & Lomas, J. & Barer, M.A. & Labelle, R.J. & Fooks, C. & Stoddart, G.L. & Anderson, G.M. & Feeny, D. & Gafni, A. & Torrance, G.W. & Tholl, W.G., 1989. "Controlling Health Expenditures- The Canadian Reality," Centre for Health Services and Policy Research 89:11r, University of British Columbia - Centre for Health Services and Policy Research..
    24. Zvi Bodie, 1989. "Inflation Insurance," NBER Working Papers 3009, National Bureau of Economic Research, Inc.
    25. 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.
    26. Davis, Karen, 1989. "National Health Insurance: A Proposal," American Economic Review, American Economic Association, vol. 79(2), pages 349-52, May.
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