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Presidential address: imperfections in the economics of public policy, imperfections in markets, and climate change

Stern, Nicholas (2010) Presidential address: imperfections in the economics of public policy, imperfections in markets, and climate change. Journal of the European Economic Association, 8 (2-3). pp. 253-288. ISSN 1542-4774

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Abstract

The economics of public policy has suffered from “collective amnesia”: we have forgotten or ignored much of the tradition of public policy in imperfect economies whose foundations were laid by James Meade and Paul Samuelson. This has been associated with a period of around two decades from the early 1980s to the early 2000s where the economics of public policy has “bent to political winds” and has fed arguments for government to get out of the way and leave everything to the markets, to self-interest and to self-regulation. This has manifested itself via the choice of models (those which imply, often directly from assumptions, passive government), patterns of teaching (the marginalisation of public economies in imperfect economics) and “compartmentalisation.” Examples in climate change where this amnesia has misled include approaches to discounting and the failure to make non-marginal change central to analysis. On the other hand, creative application of modern public economics gives interesting results such as the possibility of making both current and future generations better off and of informed discussion complementing economic instruments. There are strong formal analogies between policy on climate change and on behavioural economics. Indeed, there seems to be great potential in the combination of these two fields.

Item Type: Article
Official URL: http://www.wiley.com/bw/journal.asp?ref=1542-4766&...
Additional Information: © 2010 Wiley
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: A - General Economics and Teaching > A1 - General Economics > A10 - General
A - General Economics and Teaching > A1 - General Economics > A12 - Relation of Economics to Other Disciplines
D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency; Cost-Benefit Analysis
D - Microeconomics > D6 - Welfare Economics > D62 - Externalities
D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
Sets: Collections > Economists Online
Research centres and groups > Asia Research Centre
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 03 May 2011 11:57
URL: http://eprints.lse.ac.uk/35830/

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