You mention Pareto efficiency but not Potential Pareto Improvements (PPI). Of course Pareto efficiency only arises in perfect markets in a world with no externalities.
In reality we are surrounded by market imperfections and externalities. In that world PPIs, with a complementary system of redistribution policy aimed at equity improvements, allows in principle for overall gains in both efficiency and equity. Hence the modern basis for government interventions underpinned by cost-benefit analysis.
This is a nice post. But I wonder about this: "Clearly, the interests of the public did not necessarily align with the interests of the dominant class."
Of the *capitalist* class, yes. But that's not necessarily the dominant class. I would have said that Smith believed that the interest of landlords aligned much better with the public interest.
Perhaps in the case of small landed estates. Not sure about the landed aristocracy, that was losing power to merchants and manufacturers. I would have to read him more carefully to be sure.
Good read.
You mention Pareto efficiency but not Potential Pareto Improvements (PPI). Of course Pareto efficiency only arises in perfect markets in a world with no externalities.
In reality we are surrounded by market imperfections and externalities. In that world PPIs, with a complementary system of redistribution policy aimed at equity improvements, allows in principle for overall gains in both efficiency and equity. Hence the modern basis for government interventions underpinned by cost-benefit analysis.
This is a nice post. But I wonder about this: "Clearly, the interests of the public did not necessarily align with the interests of the dominant class."
Of the *capitalist* class, yes. But that's not necessarily the dominant class. I would have said that Smith believed that the interest of landlords aligned much better with the public interest.
Also, turning class notes into blog posts is smart. More people should do it.
Perhaps in the case of small landed estates. Not sure about the landed aristocracy, that was losing power to merchants and manufacturers. I would have to read him more carefully to be sure.