Using and Abusing Economic Theory

Journal of the European Economic Association, Vol. 1, pp. 272-300

30 Pages Posted: 4 Apr 2004

See all articles by Paul Klemperer

Paul Klemperer

University of Oxford - Department of Economics; Centre for Economic Policy Research (CEPR)

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Abstract

Economic theory is often abused in practical policy-making. There is frequently excessive focus on sophisticated theory at the expense of elementary theory; too much economic knowledge can sometimes be a dangerous thing. Too little attention is paid to the wider economic context, and to the dangers posed by political pressures. Superficially trivial distinctions between policy proposals may be economically significant, while economically irrelevant distinctions may be politically important. I illustrate with some disastrous government auctions, but also show the value of economic theory.

Keywords: Methodology, economic policy, economic theory, auctions, bidding, auction theory, spectrum auctions, telecommunications, UMTS, 3G, mobile-phones

JEL Classification: A11, B4, D44, L96

Suggested Citation

Klemperer, Paul, Using and Abusing Economic Theory. Journal of the European Economic Association, Vol. 1, pp. 272-300. Available at SSRN: https://ssrn.com/abstract=523943

Paul Klemperer (Contact Author)

University of Oxford - Department of Economics ( email )

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Oxford, OX1 3BJ
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+44 1865 278 588 (Phone)
+44 1865 278 557 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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