The Greenwald-Stiglitz theorem doesn't state that governments are efficient. What it does do is show unregulated market failure as the norm and "that government could potentially almost always improve upon the market's resource allocation." [My italics.]
The Sappington-Stiglitz theorem establishes that an ideal government could be more Pareto efficient running a business itself than through privatisation.
Of course IRL neither markets nor governments are ideal.
From my understanding, this relegates most aspects of Classical economics and Keynsian economics to being normative.
So....The political question is, given that both the unregulated marketplace and government regulation are fallible, which is more accountable? Accountability being an important constituent of democracies of almost all types.
In the US, with the number of vested interests controlling government through donation and the other appurtenances of K Street, I'd suggest no easy clear-cut answer. But it is the case that though you can change government every four years, you can't change the nature of the market without legislation and a political mandate.
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timeasmymeasure
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Date: 2010-04-20 11:15 am (UTC)The Sappington-Stiglitz theorem establishes that an ideal government could be more Pareto efficient running a business itself than through privatisation.
Of course IRL neither markets nor governments are ideal.
From my understanding, this relegates most aspects of Classical economics and Keynsian economics to being normative.
So....The political question is, given that both the unregulated marketplace and government regulation are fallible, which is more accountable? Accountability being an important constituent of democracies of almost all types.
In the US, with the number of vested interests controlling government through donation and the other appurtenances of K Street, I'd suggest no easy clear-cut answer. But it is the case that though you can change government every four years, you can't change the nature of the market without legislation and a political mandate.