This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. Journal of Economic Perspectives
  4. Spring 1998
  5. Distinguished Lecture on Economics in Government: The Private Uses of Public Interests: Incentives and Institutions

Distinguished Lecture on Economics in Government: The Private Uses of Public Interests: Incentives and Institutions

  • Joseph Stiglitz
Journal of Economic Perspectives
vol. 12, no. 2, Spring 1998
(pp. 3-22)
Download Full Text PDF
(Complimentary)

Abstract

[Joseph Stiglitz was a member of the Council of Economic Advisers from 1993-95, and chairman of the CEA from 1995 through February 1997.] Today, I want to share with you some of my thoughts about the possibilities and limitations of government. These thoughts are focused around a simple question: Why is it so difficult to implement even Pareto improvements? Working in Washington, I quickly saw that although a few potential changes were strictly Pareto improvements, there were many other changes that would hurt only a small, narrowly defined group (for example, increasing the efficiency of the legal system might hurt lawyers). But if everyone except a narrowly defined special interest group could be shown to benefit, surely the change should be made. In practice, however, "almost everyone" was rarely sufficient in government policy-making and often such near-Pareto improvements did not occur. My major theme will be to provide a set of explanations for why this might be so. I shall put forward four hypotheses in this lecture, each of which provides part of the explanation for the failure in at least one instance of a proposed Pareto improvement. These hypotheses, like much of the literature on government failures, focus on the role of incentives: how misaligned incentives can induce government officials to take actions that are not, in any sense, in the public interest.

Citation

Stiglitz, Joseph. 1998. "Distinguished Lecture on Economics in Government: The Private Uses of Public Interests: Incentives and Institutions." Journal of Economic Perspectives, 12 (2): 3-22. DOI: 10.1257/jep.12.2.3

JEL Classification

  • A11 Role of Economics; Role of Economists
  • H11 Structure, Scope, and Performance of Government
  • D73 Bureaucracy; Administrative Processes in Public Organizations; Corruption
There are no comments for this article.
Login to Comment