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Pecuniary & Market Mediated Externalities: Towards a General Theory of the Welfare Economics & Economies with Imperfect Information & Incomplete Mrkts

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  • Bruce C. Greenwald
  • Joseph E. Stiglitz

Abstract

This paper presents a simple but quite general framework for analyzing the impact of informational externalities. By identifying the traditional pecuniary effect of these externalities which nets out,the paper greatly simplifies the problem of determining when tax interventions can be Pareto improving. In some cases it also leads to simple tests, based on readily observable indicators of the efficacy of a particular tax policy. The framework of the paper is used to analyze adverse selection, signalling, moral hazard, incomplete contingent claim markets and queue rationing equilibria.

Suggested Citation

  • Bruce C. Greenwald & Joseph E. Stiglitz, 1984. "Pecuniary & Market Mediated Externalities: Towards a General Theory of the Welfare Economics & Economies with Imperfect Information & Incomplete Mrkts," NBER Working Papers 1304, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1304
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    References listed on IDEAS

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    Cited by:

    1. Mathias Kifmann, 2010. "Indikationsspezifische Kosten-Nutzen-Bewertung auf Grundlage eines sozialen Gesundheitsindexes," Discussion Paper Series 310, Universitaet Augsburg, Institute for Economics.
    2. Runge, C. Ford, 1992. "Environmental Effects Of Trade In The Agricultural Sector: A Case Study," Working Papers 14449, University of Minnesota, Center for International Food and Agricultural Policy.
    3. Iregui, Ana Maria, 2005. "Decentralised provision of quasi-private goods: The case of Colombia," Economic Modelling, Elsevier, vol. 22(4), pages 683-706, July.
    4. Martin Luckert & Wiktor Adamowicz, 1993. "Empirical measures of factors affecting social rates of discount," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 3(1), pages 1-21, February.
    5. Richard O. Zerbe, 1998. "Is cost-benefit analysis legal? Three rules," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 17(3), pages 419-456.
    6. Bullock, D. S. & Salhofer, K., 1998. "Measuring the social costs of suboptimal combinations of policy instruments: A general framework and an example," Agricultural Economics, Blackwell, vol. 18(3), pages 249-259, May.
    7. Samuel Fankhauser & Richard Tol & DAVID Pearce, 1997. "The Aggregation of Climate Change Damages: a Welfare Theoretic Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 10(3), pages 249-266, October.
    8. Horbulyk, Theodore M., 2000. "The social cost of labor in rural development: job creation benefits re-examined," Agricultural Economics, Blackwell, vol. 24(2), pages 199-208, January.
    9. Stiglitz, J.E., 1985. "Economics of information and the theory of economic development," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 5(1), April.
    10. Scarpa, Riccardo & Chilton, Susan M. & Hutchinson, W. George & Buongiorno, Joseph, 2000. "Valuing the recreational benefits from the creation of nature reserves in Irish forests," Ecological Economics, Elsevier, vol. 33(2), pages 237-250, May.
    11. Bernard Enjolras, 2004. "Individual action, institutions and social change: an approach in terms of convention," Cahiers de la Maison des Sciences Economiques r04052, Université Panthéon-Sorbonne (Paris 1).
    12. 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.
    13. Lisa C. SMITH, 1994. "Structural Adjustment And Welfare In Rural Africa: The Role Of Resource Control In Households," Staff Papers 368, University of Wisconsin Madison, AAE.
    14. Sardar M. N. Islam & Matthew F. Clarke, 2005. "The welfare economics of measuring sustainability: a new approach based on social choice theory and systems analysis," Sustainable Development, John Wiley & Sons, Ltd., vol. 13(5), pages 282-296.
    15. John Geanakoplos & Martin Shubik, 1989. "The Capital Asset Pricing Model as a General Equilibrium with Incomplete Markets," Cowles Foundation Discussion Papers 913, Cowles Foundation for Research in Economics, Yale University.
    16. Kristin Jakobsson & Andrew Dragun, 2001. "The Worth of a Possum: Valuing Species with the Contingent Valuation Method," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 19(3), pages 211-227, July.
    17. Daniel Bromley, 2004. "Reconsidering Environmental Policy: Prescriptive Consequentialism and Volitional Pragmatism," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 28(1), pages 73-99, May.
    18. Belli, Pedro, 1997. "The comparative advantage of government : a review," Policy Research Working Paper Series 1834, The World Bank.
    19. Angella, Namyenya, 2014. "Farmers' Willingness to Pay for Irrigation Water: The Case of Doho Rice Irrigation Scheme in Eastern Uganda," Research Theses 243462, Collaborative Masters Program in Agricultural and Applied Economics.
    20. Smart, Michael, 1999. "A simple proof of the efficiency of the poll tax," Journal of Public Economics, Elsevier, vol. 71(3), pages 459-465, March.
    21. Per-Olov Johansson, 1992. "Altruism in cost-benefit analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 2(6), pages 605-613, November.
    22. Vieira da Cunha, Paulo & Junho Pena, Maria Valeria, 1997. "The limits and merits of participation," Policy Research Working Paper Series 1838, The World Bank.
    23. Runge, C. Ford, 1993. "Trade, Pollution And Environmental Protection," Staff Papers 14025, University of Minnesota, Department of Applied Economics.

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