Skip to main content Accessibility help
×
Hostname: page-component-8448b6f56d-c4f8m Total loading time: 0 Render date: 2024-04-23T06:01:36.032Z Has data issue: false hasContentIssue false

9 - Decompositions and general theory of second best

Published online by Cambridge University Press:  04 April 2011

Get access

Summary

In most of the rest of the book, we will focus on project analysis. The framework (as developed in Chapters 6 and 7) is one in which decentralized government agencies make independent decisions on collective-goods provision in a mixed economy. The underlying status quo can be any configuration of publicly determined variables that is consistent with private-sector equilibrium. In particular, there will be no presumption of optimality in any of these choices. Any proposed change in this status quo can be thought of as defining a project. Hence, our concept of a project covers such diverse activities as a weather satellite, a pollution cleanup campaign, and a tax reform proposal. Naturally, the agencies cannot act completely independently since they are linked through the budget constraint. Further, we want agencies to take into account all relevant inter-dependencies. The principal aim of project analysis is to find ways of measuring project net benefits that correctly account for general equilibrium relationships and other interdependencies in this economic setting.

Throughout Part III we restrict attention to first-order welfare measures. We will give a precise operational meaning to “first order” in what follows, but informally, our approach amounts to introducing projects in such a way that their size is well defined and finding the best linear approximation to welfare contribution as a function of size. We develop the methodology first in a certainty model with a single jurisdiction allocating uncongestible goods for a closed economy.

Type
Chapter
Information
Publisher: Cambridge University Press
Print publication year: 1988

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Save book to Kindle

To save this book to your Kindle, first ensure coreplatform@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×