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Issues in Contemporary Economics volume 1: Markets and Welfare.

This volume is the Proceedings of the Ninth World Congress of the International Economic Association held in Athens, Greece in August/September 1989. This volume of proceedings offers a varied collection of papers, all of which are of considerable interest to economists and social scientists in general.

The book opens with an introduction by Kenneth Arrow in which he introduces and gives a brief summary of the papers that follow. The fifteen papers that follow are organized in three parts. Part I contains six plenary papers, Part II is made up of six papers dealing with the concept of equilibrium, and Part III consists of three papers that are concerned with social choice-welfare theory.

Part I opens with the presidential address of A. K. Sen in which he investigates the role that evaluations of equality play in the functioning of a society. In particular, Sen addresses the two interdependent questions of why equality is desirable as a social norm, and just how does one evaluate the degree of equality. Equality itself is a complex matter: equality is multidimensional. Sen refers heavily to the work of philosophers in this paper.

Anthony B. Atkinson continues Part I by analyzing a basic income scheme in which each person would receive a certain income each month. This income would be completely independent of market forces and would replace all other government transfers and income tax deductions. The only possible deviation from absolute equality in the amount a person receives would be in terms of age. In his analysis Atkinson uses optimal taxation, studies of incentives and public choice theory.

The third plenary paper is by Abel G. Aganbegyan, who is writing from the perspective of the dissolving Soviet Union. Aganbegyan is concerned with the movement from a command to a market economy. He emphasizes the need for raising the standard of living by channeling resources into consumption goods and the general needs of the society. Aganbegyan underscores the link between economic and political reform.

The following paper by Zsuzsa Ferge has heavy sociological content. Ferge is concerned with the segmentation that is occurring in capitalist and socialist societies alike. She argues that increases in the extent of poverty and difficulties with welfare systems contribute to the separation of groups in society. Ferge also claims that there is much unwarranted criticism of welfare systems.

Papers by Frank Hahn and Mahar Mangahas conclude Part I. Both papers are critiques of economic methodology. Hahn objects to notions of equilibrium that are ahistoric in the sense that there is no regard as to how and why particular equilibria are attained. The path taken by an economy depends on the past: current equilibria depend on history.

Mangahas is concerned with obtaining good measures of variables such as poverty. He is concerned with the impact of the political environment on the ability to do good survey work. Mangahas stresses the need for properly done survey work that is free from politically-induced bias.

Part II of the volume is concerned with the characterization of behavior as an equilibrium in some sense. Frank Hahn opens Part II with a paper on incomplete markets. He provides a survey of the literature of incomplete markets and questions why some markets exist while others do not. Roger Guesnerie's comment on Hahn's paper discusses completeness of markets.

Jean-Pascal Benassy presents an imperfect competition macroeconomic model. In this model firms produce goods and households supply labor. Equilibrium here is Cournot-Nash equilibrium. Inefficiencies such as unemployment exist in this--as in the Keynesian--model.

The paper of James Friedman deals with equilibrium of oligopolies. Friedman connects the "folk theorem" of game theory to oligopoly theory, and shows that, under appropriate conditions, equilibria exist.

Alan Kirman and Annick Vignes develop a search model in a fish market. In this market buyers and sellers change their prices during the day (the market lasts only one day--the goods have no value at the end of the day). Kirman and Vignes apply their model to the Marseilles fish market.

The paper by Jean-Jacques Laffont studies the application of the economics of information to the regulation of natural monopolies. In the last paper of Part II. Jean-Francois Mertens argues that a satisfactory solution theory for non-cooperative games must have several levels and that the self-enforcing or equilibrium level is the only one that is understood. Mertens argues that a historical content is often required to distinguish among equilibria.

The paper by Kotaro Suzumura that opens Part III is concerned with the Pareto-libertarian paradox. Suzumura inquires whether the paradox can be resolved if individuals can sell or waive their rights. Suzumura concludes that efforts to resolve the paradox have failed.

Serge-Christophe Kolm introduces allocations to individuals in the form of "lots" and introduces the criteria of adequacy (if lot i is assigned to individual i, then assigning lot i to individual j for all j |is not equal to~ i could not have a higher value) and equity (no one wants to trade lots). The concepts developed are applied to matching and to wage distribution.

The last paper in Part II and in the volume is by Bezalel Peleg. Peleg sets up the criteria of anonymity, monotonicity, and Pareto efficiency in solving a social choice problem. He proceeds to define a voting game in which the outcome satisfies the three criteria.
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Author:Saposnik, Rubin
Publication:Southern Economic Journal
Article Type:Book Review
Date:Apr 1, 1993
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