Here is the basic idea. Suppose you have a situation like rent control. Free marketeers say that abolishing rent control adds to efficiency. The theory of the second best says that it might not work that way unless all of the other conditions of perfect competition are met. In short, following market logic might not work, even according to the sort thinking that free market absolutists promote.
On Fri, Nov 18, 2005 at 09:01:47PM -0800, Gar Lipow wrote: > On 11/18/05, Michael Perelman <[EMAIL PROTECTED]> wrote: > > One of my students told me that he read that someone disproved the theory > > of the 2d best. > > Has anybody heard of such a proof? > > -- > > Michael Perelman > > Is the theory of the Second Best a general enough theory that it could > be conclusively refuted? I've always run into as a series of ad-hoc > rebuttals, comparing trade policy to other rememdies to market > inperfections, and showing that in a series of particular cases, trade > policy is a "second best" policy. Is it actually a general welfare > theorem with general proof or evidence? -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
