There is a principle in economics called Theory of the Second Best, whereby if a market failure cannot be corrected, it may be better from a welfare and systemic hazard perspective to substitute it for a satisficing but suboptimal mechanism.
Examples would include ham-fisted government intervention, which are strictly worse than an idealised market solution, but generally better than what a realistic market solution will actually provide.
I am not remotely qualified to say whether or not it’s a good case, but it is an extremely unusual situation which deviates from micro market assumptions along numerous dimensions.
When it comes to things like civil ordinance and domestic tomato produce, standard micro analysis is pretty good at capturing the salient characteristics of the situation and proposing remedial policy. In the case of high-profile issues, you’re selecting for aberrant situations with unusual characteristics. In those cases, it’s worth giving more consideration to ugly and distasteful interventions as well as smart and elegant ones.
There is a principle in economics called Theory of the Second Best, whereby if a market failure cannot be corrected, it may be better from a welfare and systemic hazard perspective to substitute it for a satisficing but suboptimal mechanism.
Examples would include ham-fisted government intervention, which are strictly worse than an idealised market solution, but generally better than what a realistic market solution will actually provide.
Do you think this is a good case for that kind of interventions?
Or are we thinking “second best” just because the first best options are not politically viable?
I am not remotely qualified to say whether or not it’s a good case, but it is an extremely unusual situation which deviates from micro market assumptions along numerous dimensions.
When it comes to things like civil ordinance and domestic tomato produce, standard micro analysis is pretty good at capturing the salient characteristics of the situation and proposing remedial policy. In the case of high-profile issues, you’re selecting for aberrant situations with unusual characteristics. In those cases, it’s worth giving more consideration to ugly and distasteful interventions as well as smart and elegant ones.