Information and the Change in the Paradigm in Economics

Information and the Change in the Paradigm in Economics By JOSEPH E. STIGLITZ* The research for which George Akerlof, Michael Spence, and I are being recognized is part of a larger research program which today embraces a great number of researchers around the world. In this article, I want to set the particular work which was cited within this broader agenda, and that agenda within the still broader perspective of the history of economic thought. I hope to show that information economics represents a fundamental change in the prevailing paradigm within economics. Information economics has already had a profound effect on how we think about economic policy and is likely to have an even greater influence in the future. Many of the major policy debates over the past two decades have centered around the related issues of the efficiency of the market economy and the appropriate relationship between the market and the government. The argument of Adam Smith (1776) that free markets lead to efficient outcomes, “as if by an invisible hand,” has played a central role in these debates: It suggested that we could, by and large, rely on markets without government intervention (or, at most, with a limited role for government). The set of ideas http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review American Economic Association

Information and the Change in the Paradigm in Economics

American Economic Review, Volume 92 (3) – Jun 1, 2002

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Publisher
American Economic Association
Copyright
Copyright © 2002 by the American Economic Association
ISSN
0002-8282
DOI
10.1257/00028280260136363
Publisher site
See Article on Publisher Site

Abstract

By JOSEPH E. STIGLITZ* The research for which George Akerlof, Michael Spence, and I are being recognized is part of a larger research program which today embraces a great number of researchers around the world. In this article, I want to set the particular work which was cited within this broader agenda, and that agenda within the still broader perspective of the history of economic thought. I hope to show that information economics represents a fundamental change in the prevailing paradigm within economics. Information economics has already had a profound effect on how we think about economic policy and is likely to have an even greater influence in the future. Many of the major policy debates over the past two decades have centered around the related issues of the efficiency of the market economy and the appropriate relationship between the market and the government. The argument of Adam Smith (1776) that free markets lead to efficient outcomes, “as if by an invisible hand,” has played a central role in these debates: It suggested that we could, by and large, rely on markets without government intervention (or, at most, with a limited role for government). The set of ideas

Journal

American Economic ReviewAmerican Economic Association

Published: Jun 1, 2002

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