Can someone summarize the general view among mainstream (orthodox) economists about toward "theory of the second best"?
for the uninitiated, this theory (which as very orthodox credentials) says that if there is any part of the market system that is imperfect (and nothing can be done to fix this), a move in other markets toward greater imperfection can actually _lower_ efficiency. to give a non-general equilibrium example, suppose you face a monopoly that also pollutes. The pollution cannot be ended (because of lobbying, say) but the monopoly's power is undermined (say, by increasing international trade). Then because competitors can't limit production the way a monopoly does, increased competition leads to increased production, which increases pollution. On net, this may actually hurt society. -- Jim Devine / "if there's an original thought out there, I could use it right now." -- Bob Dylan & Sam Shepherd.
