Chapter

The Market and Information

Nicholas Barr

in The Welfare State as Piggy Bank

Published in print May 2001 | ISBN: 9780199246595
Published online November 2003 | e-ISBN: 9780191595936 | DOI: http://dx.doi.org/10.1093/0199246599.003.0002
 The Market and Information

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This chapter sets out the economic theory of the role of the state that underpins the rest of the book. It starts with a simple model – the Fisher model – of rational consumer choice over the life cycle. Subsequent sections relax the underlying assumptions, discussing in turn imperfect information in the goods market, the economics of insurance, the effect of imperfect information on insurance markets, and social insurance as a response to information failure. The concluding section summarizes the implications for policy, including discussion of market failure and government failure.

Keywords: economics of insurance; Fisher model; government failure; imperfect information; market failure; role of the state; social insurance

Chapter.  8351 words.  Illustrated.

Subjects: Public Economics

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