Download or read book Second-Best Theory and Law & Economics written by Richard S. Markovits and published by . This book was released on 1998 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: According to The General Theory of Second Best, if one or more members of a set of optimal conditions cannot be fulfilled, there is no general reason to believe that fulfilling more of the remaining conditions will bring you closer to the optimum than fulfilling fewer of the remaining conditions. This Article explains that The General Theory implies that unless one can generate an argument to the contrary that focuses on the other Pareto imperfections in the system and the feedback relationships to whose importance it calls attention a policy that reduces the number or extent of Pareto imperfections in the economy without eliminating all such imperfections will be as likely to decrease as to increase allocative (economic) efficiency on that account. After pointing out the dramatic implications of this conclusion for standard law-and-economics analyses of the allocative efficiency of eliminating particular Pareto imperfections, it argues that standard first-best-allocative-efficiency analyses must be replaced with third-best-allocative-efficiency analyses, which take into consideration not only the Pareto-imperfectness and interconnectedness of the economy but also the inevitable cost and inaccuracy of both data and analysis. The Article also lists nine reasons why economists and law-and-economics scholars have failed to switch from first-best to third-best analysis despite the intellectual necessity of doing so.