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The Genealogy of Modern Theoretical Public Economics: From First Best to Second Best

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  • Roger Guesnerie

Abstract

The development of second best modelling in the seventies has shaped modern theoretical public economics. The paper discusses some key changes in the economists' conceptions. The first two sections examine the efficiency- equity dilemma. The study of non convexities has shown that counterintuitive "efficiency enhancing" income redistribution might occur. The introduction of asymmetric information has shed doubts on virtues of lump-sum compensation. The last sections focus on the intricate geometry of second best optimisation and the ambiguous value of the signals provided by the price system outside a first best world.

Suggested Citation

  • Roger Guesnerie, 1994. "The Genealogy of Modern Theoretical Public Economics: From First Best to Second Best," CESifo Working Paper Series 76, CESifo.
    • Handle: RePEc:ces:ceswps:_76
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    References listed on IDEAS

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    6. Peaucelle, Irina, 2002. "Capital social et anthroponomie," CEPREMAP Working Papers (Couverture Orange) 0204, CEPREMAP.
    7. Berliant, Marcus & Gouveia, Miguel, 2022. "On the Political Economy of Nonlinear Income Taxation," MPRA Paper 113140, University Library of Munich, Germany.
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    9. Edoardo Marcucci, 1999. "Road Pricing: Old Beliefs, Present Awareness and Future Research Patterns," Working Papers 1999.4, Fondazione Eni Enrico Mattei.

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