I read the D.M.Winch book I picked up, Analytical Welfare Economics, on the train yesterday. My overwhelming reaction was, “You could get away with teaching such arid material in 1971??” Still, there were a couple of nuggets I enjoyed.
“While perfect competition is sufficient for the achievement of a Pareto optimum, it is not necessary. It is quite possible theoretically to satisfy the necessary conditions in a controlled socialist state. ‘Perfect’ socialism is every bit as good as perfect competition when judged by this criterion. In te real world of course, socialism is far from perfect, but so is competition. Since bith systems are capable of achieving a Paretian optimum in their conceptually perfect forms, the proposition [the 1st welfare theorem] concerning perfect competition does not establish its superiority.”
I liked the reminder about the formal equivalence between the ideal free market and the ideal centrally planned economy, its general equilibrium dual (an idea – as I’ve said before – brilliantly illustrated by Francis Spufford’s Red Plenty).
There was also a nice link made between Scitovsky’s argument about welfare reversals, overturning the possibility of Hicks-Kaldor compensation and the difference between compensating and equivalent variation. Still, I won’t be troubling my students to get Prof Winch’s book out of the recesses of the library…
Wasn’t this point made in the in the socialist calculation debate? The Austrians argued against the market socialists, and standard neoclassical theory, since the socialist argument could be crudely put as ‘replace the auctioneer with a central planner and the GE model still works’.
Indeed – this is Red Plenty’s theme.
Red Plenty is a great book. For a WE textbook, doesn’t Yew-Kwang Ng’s book work? I don’t remember it as that advanced.
A very useful blog, just one thing disturbs me – particularly, given the recent upheaval around economics, very much for the better I think: why is every single link leading to Amazon? Seems like a bit of a contradiction given Amazon’s practices.
I don’t know the Ng book & will look, thank you. Although I’m writing my own text book about public policy…
With regard to Amazon, you’re right. As I once explained here in the distant past, I use Amazon because it’s the only online store with an associates programme, and I use the modest amount it makes me to finance this blog (buying books, sending books to guest reviewers, covering some admin cost). I’d switch if there were another option.
Ah, I admit I haven’t looked into that. Was going to say Book Depository, as their banners pop up very often, but I see Amazon has acquired them . . .
Just looked at the preface to the Ng book (‘Welfare economics’), it does say it is suitable for advanced undergraduates (and upwards), so parts of it at least might be useful or serve as inspiration; writing one’s own textbook is always the best option though.
There is an interesting bit missing and ignored in economic history. At the time of Kaldor in the 50’s, who was well connected and others the dark secret was what was going on in the early days of computing. They knew that there were now big machines that could do massive analysis and calculations. Ergo, for the state to plan and manage the economy, it would soon be possible for the vast number crunching and analysis required to be done. Remember Harold Wilson, who had been at the centre of Whitehall as a Civil Servant and statistician? Sadly, the economists did not realise that the hardware was one thing, but the software was quite another.