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Principles of Economic Design

  • Nicolaus TidemanEmail author
Chapter
Part of the Studies in Economic Design book series (DESI)

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.

Notes

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.

References

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Copyright information

© Springer Nature Switzerland AG 2019

Authors and Affiliations

  1. 1.Economics DepartmentVirginia TechBlacksburgUSA

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