Social Interactions and the Need for Institutions: Difference between revisions
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The classical constitutional conundrum begs the question: how can social interactions be structured so that people are free to choose their own actions while avoiding outcomes that none would have chosen? In other words, how can Pareto-efficient outcomes be ensured? The problem with policy designed to address this conundrum lies in the difficulty in ranking outcomes, especially when Pareto-inefficient outcomes are sometimes preferred. Rules governing interactions are needed to account for externalities, or the unintended consequences of actions taken by self-interested individuals. Adam Smith's argues that given appropriate institutional conditions, an invisible hand will influence self-interested individuals to create socially desirable outcomes. | |||
==Coordination and Conflict== | ==Coordination and Conflict== | ||
Revision as of 19:04, 24 April 2009
The classical constitutional conundrum begs the question: how can social interactions be structured so that people are free to choose their own actions while avoiding outcomes that none would have chosen? In other words, how can Pareto-efficient outcomes be ensured? The problem with policy designed to address this conundrum lies in the difficulty in ranking outcomes, especially when Pareto-inefficient outcomes are sometimes preferred. Rules governing interactions are needed to account for externalities, or the unintended consequences of actions taken by self-interested individuals. Adam Smith's argues that given appropriate institutional conditions, an invisible hand will influence self-interested individuals to create socially desirable outcomes.
Coordination and Conflict
Tragedy of the Commons
fishing example
Social Interaction
palanpur example
