Talk:Theory of the second best

incoherent
"since it provides degree of trade advanced according to stages of economic integration (" What is being provided? I would fix this but I can't even guess what was intended.

Needs more concrete examples
The only concrete example given is the mining monopoly. This helped, but not much.

Opening heading
I am wondering: In this sentence of the article: "it may be better to let two market imperfections cancel each other out rather than making an effort to fix either one. Thus, it may be optimal for the government to intervene in a way that is contrary to laissez faire policy.",

shouldn't it mean: a way that is conformed to laissez-faire policy?. Wouldn't it make more sense?

(MIKO) -- —Preceding unsigned comment added by 84.74.50.57 (talk) 16:59, 3 June 2008 (UTC)

This entry is incomplete as it stands, and in a way which generates a political bias i.e. in favour of state intervention.

Another way of looking at the Lipsey/Lancaster point is as follows. If you are not at a Pareto-optimal point for the economy, you don't know whether any change that doesn't actually take you onto an optimal point is going to improve efficiency (i.e. make everyone better off). Even when you move in what appears to be the direction of greater efficiency, e.g. by changing all controllable parameters to an average of where you are now and where a Pareto optimum is, you might be making things less efficient i.e. making everyone worse off.

So another moral (apart from the one given) is that, when you have a market that is already regulated or otherwise distorted, it is not necessarily a good idea to move in the direction of less distortion. You can be sure that if you can get to a Pareto optimum, that is a good thing (at least in terms of efficiency); apart from that, you can't be certain of the effects of different policy changes. This is a consequence of the severely restricted conclusions of Pareto theory.

In fact, the moral given in the entry is questionable as stated. It isn't really the case that intervention to move things in a direction different from the pro-market one is sometimes a good idea. It's just that such a move might be a good thing, only neither the government nor anyone else can ever know if it would or not.

FWadel 15:33, 1 March 2007 (UTC)

I changed the wording from "laissez-faire policy" to "usual policy" to reflect that the theory is equally relevant when the government is intending to work from either direction (from a position of less-free markets to more-free, and also vice-versa). Perhaps better wording still may be something like "seemingly sensible policies" or some such.

122.57.73.29 (talk) 02:00, 11 November 2010 (UTC)

Requested move

 * The following discussion is an archived discussion of a requested move. Please do not modify it. Subsequent comments should be made in a new section on the talk page. No further edits should be made to this section. 

The result of the move request was: Move. Jafeluv (talk) 08:29, 9 December 2010 (UTC)

Theory of the Second Best → Theory of the second best — The theory is almost always referred to in lowercase. It's only capitalized in article titles. There's sometimes a hyphen, in "second-best", but it's not as often as without it. Gary King ( talk  ·  scripts )  03:24, 30 November 2010 (UTC)
 * Support, Google books search confirms what Gary says.--Kotniski (talk) 12:29, 8 December 2010 (UTC)
 * The above discussion is preserved as an archive of a requested move. Please do not modify it. Subsequent comments should be made in a new section on this talk page. No further edits should be made to this section.

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 * Reference : Antoine d'Autume & Katheline Schubert & Cees Withagen, 2011. "Should the carbon price be the same in all countries?," Documents de travail du Centre d'Economie de la Sorbonne 11076, Universite Pantheon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.

ExpertIdeasBot (talk) 16:10, 24 August 2016 (UTC)

OR example with too many weird assumptions
Redacted from article here for discussion:

For example, consider a mining monopoly that is also a polluter: mining leads to tailings being dumped in the river and deadly dust in the workers' lungs. Suppose in addition that there is nothing at all that can be done about the pollution without also reducing production. However, the government is able to break up the monopoly.

The problem here is that increasing competition in this market is likely to increase production (since monopolists restrict production). Because pollution is highly associated with production, pollution will most likely increase. Thus, it is not clear that eliminating the monopoly increases overall welfare. Gains from trade in the mined mineral will increase, but externalities from pollution will increase as well, possibly outweighing the gains from trade.

First of all, many jobs have a negative aspect, often involving risk or health. To some degree this is priced into the job market, but governments also manage these sectors by edict, especially where medicine is a common good, because such a government holds the bag on that externality.

Beyond that starting point, the rest of this is right out of Yes Minister.

If health and safety standards really are being violated, why doesn't the government drop the ban hammer?

For some reason they won't drop the ban hammer, but nevertheless they concern themselves with the positive margin (expansion of what they won't ban outright).

And if the Department of Trade wants to enforce consistent rules concerning monopoly powers, should this kind of calculation get out in front of the train?

In addition to the minty OR flavour, it all sounds like a giant hairball of perverse justifications for rampant dysfunction. &mdash; MaxEnt 02:52, 5 January 2022 (UTC)