thanks. So the idea is that if all distortions can be reduced proportionally, that would be good. Hardly a disproof and unlikely to achieve. But that is what I needed.
On Sat, Nov 19, 2005 at 09:27:49AM -0800, Jim Devine wrote: > >One of the more disconcerting "negative" results in the theory of > welfare economics was articulated by Richard Lipsey and Kelvin > Lancaster in 1956 in their paper "The General Theory of Second Best". > They demonstrated that if there are "distortions" in more than one > market, even in a one-consumer economy, it may not be beneficial to > remove a distortion in a single market if distortions remain in other > markets. To policy economists this observation might seem a > devastating criticism of recommendations for "piecemeal reform". In > 1970, Edward Foster and Hugo Sonnenschein discovered a remarkable > result that removes some of the sting of the Lipsey-Lancaster > observation. They proved that under reasonably general circumstances, > at least one kind of "piecemeal reform", namely "radial" or > proportional reductions in all distortions, would improve welfare in a > oneconsumer, general equilibrium economy.< > > from: > http://66.102.7.104/search?q=cache:9RHL_M5dOM8J:www.econ.ucsb.edu/~tedb/Theory/distort.ps+%22general+theory+of+second+best%22+proof&hl=en&lr=lang_en > > > On 11/19/05, Michael Perelman <[EMAIL PROTECTED]> wrote: > > The student said that the theorem had been "disproved". I suspect that > > Daniel's > > guess is correct, since that is what I suggested in class. I was just > > wondering if > > anyone knew any more. > > > > > > On Sat, Nov 19, 2005 at 12:36:52PM -0000, Daniel Davies wrote: > > > utterly improbable. It's the *Theorem* of the second best; viz it is > > > logically implied by its assumptions. Someone might have shown that one > > > or > > > other of its assumptions were unrealistic but this is hardly a criticism > > > to > > > which standard neoclassical economics are immune. > > > > > > best > > > dd > > > > > > -----Original Message----- > > > From: PEN-L list [mailto:[EMAIL PROTECTED] Behalf Of Michael > > > Perelman > > > Sent: 18 November 2005 23:44 > > > To: [email protected] > > > Subject: theory of the second best > > > > > > > > > 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 > > > Economics Department > > > California State University > > > Chico, CA 95929 > > > > > > Tel. 530-898-5321 > > > E-Mail michael at ecst.csuchico.edu > > > > -- > > Michael Perelman > > Economics Department > > California State University > > Chico, CA 95929 > > > > Tel. 530-898-5321 > > E-Mail michael at ecst.csuchico.edu > > > > > -- > Jim Devine > "Segui il tuo corso, e lascia dir le genti." (Go your own way and let > people talk.) -- Karl, paraphrasing Dante. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
