Microeconomic Policy

Sustaining a balance betweenprivate interests, public oncern and institutional governance is a challenge to society and microeconomic policy making can be seen as being at the intersection of the market economy, state intervention and social institutions. This text guides the reader through policy areas, illustrating how they can be approached and appropriate mehtods for handling them, linking principles to settings, policy and applications.

S. I. Cohen is Professor of Economics at Erasmus University Rotterdam and the Founding Director of the Foundation for Economic Research Rotterdam.

List of figures

ix

List of tables

x

List of policy examples

xi

Preface

xiii

Background

1

(8)

Introduction

Welfare criteria

Requirements for obtaining maximum welfare in a general economic system

Discussion of underlying assumptions

Mechanisms of alternative economic systems

Performance of alternative economic systems

Market economy: review of mechanisms, limitations and responses

9

(13)

Introduction

Efficiency

Equity

Areas of market failures and state interventions

A stylized approach towards microeconomic policy preparation

A brief listing of analytical methods

Indivisibilities: competition policy and technology policy

22

(23)

Competition policy

Introduction

The problem of natural monopoly

Nationalization versus privatization policies

Regulation versus deregulation policies

The problem of imperfect competition

Dominant position legislation policies

Restrictive practice legislation policies

Technology policy

Introduction

The innovating firm approach

Pursued technology policies

The perspective technology approach

Perspective technology oriented policies

Uncertainty: the case for governance policies

45

(24)

Introduction

The problem of incomplete information

Governance responses to incomplete information

The problem of asymmetric information

Governance responses to asymmetric information

Incomplete markets

Externalities: industrial policy and environmental policy

69

(34)

On characteristics of goods

The problem of externalities

Positive externalities: some principles

Positive externalities: some examples from industrial policy

Negative externalities: some principles

Negative externalities: some examples from environmental policy

Collectivities: social provision and insurance schemes

103

(19)

Public goods

Merit goods

The problem of collectivities

Practical approaches to resolve the problem

Social provisions

Insurance schemes

Distribution: income policies and endowment strategies

122

(21)

Introduction

Normative approaches

Positive approaches

Income policies

Trade-offs and reendowment stategies in the long run

State intervention: review of mechanisms, limitations and reforms

143

(20)

Introduction

The electorate and pressure groups

Bureaucratic bias

Motivational effects

Allocative effects

State intervention and social efficiency in the longer term

The social order: review of mechanisms, outcomes and prospects

163

(19)

Interdependent behaviour and economic performance

Mechanisms of interdependent behaviour

More on the dynamics and sustainability of altruistic behaviour

Policy implications of interdependent behaviour: norm formation and social institutions

References

182

(4)

Index

186

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Summary

Author Biography

Table of Contents

Supplemental Materials