Book contents
- Frontmatter
- Contents
- List of boxes
- List of tables
- List of symbols, abbreviations and acronyms
- Preface
- 1 Introduction
- Part I The market, efficiency and equity
- Part II Normative and positive theory of economic policy
- 4 The normative theory of economic policy
- 5 Government failures: elements of a positive theory of economic policy
- Part III Microeconomic policies
- Part IV Macroeconomic policies
- Part V Public institutions in an international setting
- Part VI Globalisation and the quest for a new institutional setting
- Bibliography
- Author index
- Subject index
5 - Government failures: elements of a positive theory of economic policy
Published online by Cambridge University Press: 14 May 2010
- Frontmatter
- Contents
- List of boxes
- List of tables
- List of symbols, abbreviations and acronyms
- Preface
- 1 Introduction
- Part I The market, efficiency and equity
- Part II Normative and positive theory of economic policy
- 4 The normative theory of economic policy
- 5 Government failures: elements of a positive theory of economic policy
- Part III Microeconomic policies
- Part IV Macroeconomic policies
- Part V Public institutions in an international setting
- Part VI Globalisation and the quest for a new institutional setting
- Bibliography
- Author index
- Subject index
Summary
Representing social groups
In section 4.6 we discussed the limitations of the normative or ‘classical’ theory of economic policy in general terms. In this chapter we will analyse the limitations associated with the normative character of the theory.
The normative theory of economic policy is a ‘theory of the public interest’ and ignores the problem of the realism of the hypotheses on which it is based, in particular with reference to the nature of individuals and the behaviour of policymakers. In this sense, it suffers from the same limitations that typify the conceptual apparatus of neoclassical theory, on which it draws extensively. Much of the neoclassical approach is constructed in axiomatic form: the behaviour of individuals is deduced from a set of postulates. The normative theory of economic policy postulates the existence of an agent (the policymaker) who acts in the interests of somewhat indistinct individuals, incorporating the ‘will of the people’ into a social welfare function (Downs, 1957).
This approach largely neglects the following aspects of reality:
(a) the economic system is not composed of indistinct individuals
(b) policymakers are not anonymous, as the theory assumes.
In this section, we address the first aspect before moving on to the second in section 5.2.
The normative theory of economic policy in its most extreme form assumes that individuals are virtually anonymous, albeit possessing specific (abstract) preferences and different initial endowments of resources.
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- Economic Policy in the Age of Globalisation , pp. 116 - 136Publisher: Cambridge University PressPrint publication year: 2005