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35 Cato J. 133 (2015)
Welfare Economic and Second-Best Theory: Filling Imaginary Economic Boxes

handle is hein.journals/catoj35 and id is 137 raw text is: WELFARE ECONOMICS AND SECOND-BEST THEORY: FILLING IMAGINARY ECONOMIC BOXES Richard E. Wagner Since the beginnings of the efforts of economists to give their dis- cipline scientific grounding, economists have thought their theoreti- cal efforts had relevance for addressing significant public issues. While the classical economists generally supported what Adam Smith described as the system of natural liberty, those economists also weighed in on numerous issues of public discussion. The tenor and substance of those efforts is set forth wonderfully by Lionel Robbins (1952) and Warren Samuels (1966). While the analytical default setting of those economists was to support the system of nat- ural liberty, they also recognized the value of sound public policy in supporting that system. The classical economists thought that there could be publicly beneficial activities that the system of natural lib- erty would be unlikely to do well in providing. They also thought that there were activities provided through commercial transactions that could wreak significant effects on bystanders to those transactions. The amount of education acquired within a society was one such can- didate (West 1965), with the care of the poor being another (Himmelfarb 1983). In such matters as these, the classical econo- mists engaged in strenuous debate and discussion that served as a forenlnner to the development of welfare economics during the 20th century. Cato Journal, Vol. 35, No. 1 (Winter 2015). Copyright © Cato Institute. All rights reserved. Richard E. Wagner is the Holbert L. Harris Professor of Economics at George Mason University.