Besley, Timothy and Coate, Stephen (1997) Analyzing the case for government intervention in a representative democracy. Theoretical Economics; TE/1997/335, TE/07/335. Suntory and Toyota International Centres for Economics and Related Disciplines, London School of Economics and Political Science, London, UK.
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The welfare economic method for analyzing the case for government intervention is often critized for ignoring the political determination of policies. The standard method of accounting for this critique studies the case for intervention under the constraint that the level of the instrument in question will be politically determined. We critize this method for its implicit assumption that new interventions will not affect the level of existing policy instruments. We argue that this assumption is particularly misleading in suggesting that political economy concerns must dampen the case for intervention.
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