Market Failure or Success
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Market Failure or Success

The New Debate

9781843760252 Edward Elgar Publishing
Edited by Tyler Cowen, Professor of Economics, George Mason University, Director, Mercatus Center and Director, James Buchanan Center for Political Economy, US and Eric Crampton, Chief Economist, The New Zealand Initiative
Publication Date: 2003 ISBN: 978 1 84376 025 2 Extent: 384 pp
Recent years have seen the development of new theories of market failure based on asymmetric information and network effects. According to the new paradigm, we can expect substantial failure in the markets for labor, credit, insurance, software, new technologies and even used cars, to give but a few examples. This volume brings together the key papers on the subject, including classic papers by Joseph Stiglitz, George Akerlof and Paul David.

The book provides powerful theoretical and empirical rebuttals challenging the assumptions of these new models and questioning the usual policy conclusions. It goes on to demonstrate how an examination of real markets and careful experimental studies are unable to verify the new theories. New frontiers for research are also suggested.

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Recent years have seen the development of new theories of market failure based on asymmetric information and network effects. According to the new paradigm, we can expect substantial failure in the markets for labor, credit, insurance, software, new technologies and even used cars, to give but a few examples. This volume brings together the key papers on the subject, including classic papers by Joseph Stiglitz, George Akerlof and Paul David.

The book provides powerful theoretical and empirical rebuttals challenging the assumptions of these new models and questioning the usual policy conclusions. It goes on to demonstrate how an examination of real markets and careful experimental studies are unable to verify the new theories. New frontiers for research are also suggested.

The first systematic analysis of these important new theories, Market Failure or Success is required reading for all who seek to better understand one of the most exciting debates in economics today.
Contributors
Contributors: G.A. Akerlof, J. Andreoni, A.N. Berger, E.W. Bond, H.L. Carmichael, J. Cawley, T. Cowen, E. Crampton, P.A. David, H. Demsetz, E. Hoffman, M.R. Isaac, D.B. Klein, S.J. Liebowitz, S.E. Margolis, T. Philipson, J.E. Stiglitz, G. Tullock, G.F. Udell, J.M. Walker, A.W. Williams, S.D. Williamson
Contents
Contents:

INTRODUCTION
1. Introduction
Tyler Cowen and Eric Crampton

PART 1 NEW MARKET FAILURE THEORIES
2. Toward a general theory of wage and price rigidities and economic fluctuations
Joseph E. Stiglitz

3. Keynesian economics and critique of first fundamental theorem of welfare economics
Joseph E. Stiglitz

4. The market for ‘lemons’: quality uncertainty and the market mechanism
George A. Akerlof

5. Path dependence, its critics and the quest for ‘historical economics’
Paul A. David

PART 2 THEORETICAL RESPONSES
6. Information and efficiency: another viewpoint
Harold Demsetz

7. Efficiency wage models of unemployment: one view
H. Lorne Carmichael

8. Do informational frictions justify federal credit programs?
Stephen D. Williamson

9. The demand for and supply of assurance
Daniel B. Klein

PART 3 EMPIRICAL AND EXPERIMENTAL RESPONSES
10. Beta, Macintosh and other fabulous tales
Stan J. Liebowitz and Stephen E. Margolis

11. Some evidence on the empirical significance of credit rationing
Allen N. Berger and Gregory F. Udell

12. An empirical examination of information barriers to trade in insurance
John Cawley and Tomas Philipson

13. A direct test of the ÔlemonsÕ model: the market for used pickup trucks
Eric W. Bond

14. Public choice experiments
Elizabeth Hoffman

15. Non-prisoner’s dilemma
Gordon Tullock

16. Group size and the voluntary provision of public goods: experimental evidence utilizing large groups
R. Mark Isaac, James M. Walker and Arlington W. Williams

17. Cooperation in public-goods experiments: kindness or confusion?
James Andreoni

Index

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