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p. 1167. What works?locked

  • Avinash Dixit


Given the long list of defects in markets and governments outlined in this VSI, the world has not fared too badly. ‘What works?’ concludes that a mixed economy — where competitive markets or similar institutions generate information about scarcity and create incentives to alleviate the scarcity in a reasonably efficient manner, where antitrust policies keep the markets open to competition, where the government and other social organizations help overcome the inefficiencies of externalities, and where political competition acts as a corrective mechanism against abuses of power and serious errors of judgement — is the best way of organizing microeconomic activity.

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