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Economic Policy In A Second-Best Environment




The article begins by summarizing the arguments that lie behind the use of first-best models and notes the inappropriateness of using these results in what is patently a second-best world. Using several well-known examples from the literature, it is claimed, that if second-best considerations are taken seriously, then it is much more difficult, if not impossible, to divorce efficiency from equity than one might have thought from the use of first-best economic models. From this it follows that policy recommendations require us to make and use interpersonal comparisons of utility and that we should do this as well as we can (even if it is not scientific).
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Suggested Citation

  • Blackorby, C., 1990. "Economic Policy In A Second-Best Environment," G.R.E.Q.A.M. 90c01, Universite Aix-Marseille III.
  • Handle: RePEc:fth:aixmeq:90c01

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    References listed on IDEAS

    1. Simon Erlich & Victor Ginsburgh & Ludo Van der Heyden, 1987. "Where do real wage policies lead Belgium: a general equilibrium analysis," ULB Institutional Repository 2013/1747, ULB -- Universite Libre de Bruxelles.
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    Cited by:

    1. Ru_diger Pethig, 2001. "On the future of environmental economics," Chapters,in: Frontiers of Environmental Economics, chapter 15 Edward Elgar Publishing.
    2. David A. Green, 2014. "What Is a Minimum Wage For? Empirical Results and Theories of Justice," Canadian Public Policy, University of Toronto Press, vol. 40(4), pages 293-314, December.
    3. 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.
    4. Guesnerie, R., 1995. "The genealogy of modern theoretical public economics: From first best to second best," European Economic Review, Elsevier, vol. 39(3-4), pages 353-381, April.
    5. Peters, T. & Adamowicz, Wiktor L. & Boxall, Peter C., 1995. "A Random Utility Analysis of Southern Alberta Sportfishing," Project Report Series 24048, University of Alberta, Department of Resource Economics and Environmental Sociology.
    6. McIntosh, E. & Ryan, M., 2002. "Using discrete choice experiments to derive welfare estimates for the provision of elective surgery: Implications of discontinuous preferences," Journal of Economic Psychology, Elsevier, vol. 23(3), pages 367-382, June.
    7. C. Benassi & E. Randon, 2015. "Optimal Commodity Taxation and Income Distribution," Working Papers wp1001, Dipartimento Scienze Economiche, Universita' di Bologna.
    8. 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.
    9. Olof Johansson-Stenman, 1998. "The Importance of Ethics in Environmental Economics with a Focus on Existence Values," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 11(3), pages 429-442, April.
    10. Tim Hazledine, 1998. "Rationalism Rebuffed? Lessons from Modern Canadian and New Zealand Competition Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 13(1), pages 243-264, April.
    11. Boadway, Robin, 1999. "Le rôle de la théorie de l’optimum du second rang en économie publique," L'Actualité Economique, Société Canadienne de Science Economique, vol. 75(1), pages 29-65, mars-juin.
    12. Dagenais, Denyse L., 1995. "L’économiste et les confitures," L'Actualité Economique, Société Canadienne de Science Economique, vol. 71(3), pages 277-290, septembre.
    13. Ugur, Mehmet & Guner, Umit, 2010. "Innovation and competition in EU15: Empirical evidence on the Lisbon Decade and beyond," MPRA Paper 25705, University Library of Munich, Germany, revised Oct 2010.
    14. Olof Johansson-Stenman, 2000. "On the Value of Life in Rich and Poor Countries and Distributional Weights Beyond Utilitarianism," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 17(3), pages 299-310, November.

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    social welfare ; second best ; economic theory;


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