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Principles of Economic Design

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The Future of Economic Design

Part of the book series: Studies in Economic Design ((DESI))

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Abstract

There are three central principles of good economic design: (1) Freedom of choice leads to good outcomes. (2) Charging (crediting) people for the cost (benefits) of their choices yields efficient outcomes. (3) Goodwill is highly productive. These central principles lead to free markets, Pigouvian taxes and subsidies, lump-sum taxes on land, mechanisms that apply marginal-cost pricing to participation in decisions, and money creation by interest-free lending to citizens, in proportion to their expected demand for cash balances. However, every improvement in efficiency can be introduced in myriad ways, with different distributional consequences, leading to conflict that inhibits improvements. Therefore greater consensus about distributional equity is necessary to improve economic design.

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References

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Acknowledgements

I appreciate the comment by Gabriel Carroll. In response to it, I altered the text to make my idea clearer. Therefore the precise text he quotes is no longer present. Florenz Plassmann offered valuable suggestions.

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Authors and Affiliations

  1. Economics Department, Virginia Tech, Blacksburg, VA, 24061, USA

    Nicolaus Tideman

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  1. Nicolaus Tideman
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Correspondence to Nicolaus Tideman .

Editor information

Editors and Affiliations

  1. CNRS - Paris School of Economics, Paris, France

    Jean-François Laslier

  2. University of Glasgow, Glasgow, UK

    Hervé Moulin

  3. Université Paris-Dauphine, Université PSL, CNRS, LAMSADE, Paris, France

    M. Remzi Sanver

  4. Union College, Schenectady, NY, USA

    William S. Zwicker

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Tideman, N. (2019). Principles of Economic Design. In: Laslier, JF., Moulin, H., Sanver, M., Zwicker, W. (eds) The Future of Economic Design. Studies in Economic Design. Springer, Cham. https://doi.org/10.1007/978-3-030-18050-8_2

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