Autore
Hammond, Peter J.

Titolo
The role of information in economics
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1990 - Fascicolo: 10 - Pagina iniziale: 2 - Pagina finale: 13

Early discussions of information in economic systems emphasized how markets would enable individuals to co-ordinate their actions by responding to price signals. Yet markets on their own cannot ensure a just distribution of wealth. Nor is it easy for markets to ensure appropriate provision of public goods or protection of the environment. These inevitable market failures become particularly hard to resolve when information is dispersed because then individuals have incentives to manipulate almost any economic system which seeks to use their private information. Only non-manipulable or “incentive compatible” economic systems are truly feasible. Efficient incentive compatible economic systems typically require wealth redistribution and public good provision to be achieved through interference in markets, including distortionary taxation, rationing, controls, etc. Then, indeed, illegal, unofficial or informal markets actually make successful interference in markets harder than it would be otherwise, as illustrated graphically by the difficulties in controlling narcotic drugs. Finally, because a borrower always has the option of default, and because a lender often lacks the information to ensure that the consequences are always so unattractive that default never occurs, capital markets are very different from markets for current commodities. This difference makes some centralized control of capital markets essential if order is to be preserved.



Testo completo: http://hdl.handle.net/1814/349

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