NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Invisible Hand and Modern Welfare Economics

Joseph E. Stiglitz

NBER Working Paper No. 3641
Issued in March 1991
NBER Program(s):   PE

This paper reviews and puts into perspective recent work reassessing the first and second Fundamental Theorems of Welfare Economics. It assesses the implications of the Greenwald-Stiglitz theorem establishing the (constrained) Pareto inefficiency of market economies with imperfect information and incomplete markets as well as recent work on endogenous technological change. The information theoretic limitations to the Second Fundamental Theorem are also discussed, including the inability to separate out issues of equity and efficiency. The final sections of the paper consider the consequences of these problems for economic organization, economic policy, and the role of ideology in the belief in the Invisible Hand.

download in pdf format
   (365 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w3641

Published: Vines, David and Andrew A. Stevenson (eds.) Information, strategy and public policy. Oxford and Cambridge, MA: Blackwell, 1991.

Users who downloaded this paper also downloaded* these:
Stiglitz w2189 Pareto Efficient and Optimal Taxation and the New New Welfare Economics
Stiglitz w3580 Methodological Issues and the New Keynesian Economics
Arnott and Stiglitz w3316 The Welfare Economics of Moral Hazard
Sappington and Stiglitz w2196 Privatization, Information and Incentives
Greenwald and Stiglitz w2160 Keynesian, New Keynesian, and New Classical Economics
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us