Supply, Demand and the ‘Real World’
Conclusion: Some Reflections on Economic Policy
CONCLUSION Some reﬂections on economic policy Collectively these lectures suggest that the theory of “Supply and Demand” is not as generalizable as many economists have come to suppose. A parallel concern is how eﬀectively a market system may serve our social and individual need to reliably and reasonably allocate commodities, jobs, and assets. To a degree, this is a larger question, connected to the theory of macroeconomics, and for that reason a full answer is beyond the scope of a set of introductory lectures. But enough has been written to advance a few ideas. Here I will brieﬂy summarize four instances where regulation, if appropriately drawn, can enhance the performance of markets. First, well-crafted regulations can enhance the quality and quantity of information available to the customer. By this means, many “experience” goods can be transformed into “inspection” goods. (To review, experience goods are those about which one learns of their underlying qualities with the passage of time. By contrast, most of the germane qualities of inspection goods can be assessed at the time of purchase.) While such regulations may be unimportant when considering the purchase of a trinket, the situation is more serious if fraud or public health are potential considerations. The implications of this idea are more sweeping than one might at ﬁrst suppose. As James K. Galbraith argues in a recent and important paper, when people purchase a good they are actually purchasing both the item and some assurance that the product is safe...
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