Concluding comments to the debate

Richard G. Lipsey, Yew Kwang Ng

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In this final piece to the symposium for a special issue of Pacific Economic Review on the theories and applications of second-best and third-best theories, Richard Lipsey and Yew-Kwang Ng provide their final comments to the debate. Several issues of agreement and disagreement are discussed. Most importantly, while both agree on the formal correctness of both the second-best and third-best theories, Lipsey believes the main proposition of third-best theory (following the first-best rules under Informational Poverty) is applicable only to a situation (status quo) where the first-best rule (such as taxing a pollution at the marginal damage of $N) is already being followed; Ng regards it as applicable whether or not the first-best rule is currently being followed. This also partly explains their difference on the practical policy relevance and the importance of that theory.

Original languageEnglish
Pages (from-to)213-228
Number of pages16
JournalPacific Economic Review
Issue number2
Publication statusPublished - 1 May 2017
Externally publishedYes

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