Using and Abusing Economic Theory
Journal of the European Economic Association, Vol. 1, pp. 272-300
30 Pages Posted: 4 Apr 2004
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: Suggested Citation