the future of economic theory and policy

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1、9thefutureofeconomictheoryandpolicyOnlyeconomistsstillputthecartbeforethehorsebyclaimingthatthegrowingturmoilofmankindcanbeeliminatedifpricesareright.Thetruthisthatonlyifourvaluesarerightwillpricesalsobeso.Wehadtointroduceprogressivetaxation,socialsecurity,andstr

2、ictrulesforforestexploitation,andnowwestrugglewithanti-pollutionlaws,preciselybecausethemarketmechanismbyitselfcanneverhealawrong.—NicholasGeorgescu-Roegen,EnergyandEconomicMyths(NewYork:PergamonPress,1976),xixPublicPolicyintheWalrasianSystemThetheoreticalcontrov

3、ersiesdiscussedinpreviouschaptersmayseemeso-terictomostnon-economistsandeventomanyeconomists.ButthepoweroftheformalizationofAdamSmith’sinvisiblehandinneoclassicalwelfaretheoryhasdriveneconomicpolicyinthedecadessinceWorldWarII.Theantipathytopublicpolicyisreflected

4、inthelanguageofmosteconomicstext-books.Forexample,policiestoprotecttheenvironmentarecharacterizedaseither“commandandcontrol”or“free-market”solutions.Whowouldwanttobecommandedandcontrolledwhentheycouldbefree?ButtodaythetheoreticalandempiricalchallengestotheWalrasi

5、anmodelarebeginningtospilloverintotherealmofpublicpolicy.Decadesoftheoreticalworkhasshownthat,evenifwegrantallthere-strictiveassumptionsofwelfareeconomics,fromHomoeconomicustoper-fectlyoperatingcompetitivemarkets,thereisnowayto“close”theneoclassi-calwelfaresystem

6、fromwithin.ThereisnowaytopickaparticularParetooptimaldistributionwithoutappealingtoanethicaljudgment(BowlesandGintis2000;ChipmanandMoore1978;Suzumura1999).ThepotentialPareto164modernwelfareeconomicsimprovement(PPI)principlewaspromotedasanalternativetothesocialwel

7、farefunction,whichcouldbeconstructedonlybymakinginterpersonalcomparisonsofutility.ButthePPIapproachfounderedontheassumptionthatpreferencesareindependentandadditiveratherthaninteractive.Thesearchforapositiveeconomicsfreeofvaluejudgmentsturnedouttobeanexerciseinfut

8、ility.Turningpolicydecisionsovertothemarketisasmuchanethicaljudgmentasanyotherpublicpolicy.ThemathematicalconstraintsoftheWalrasiansystemdictatethattherecanben