THEORY AND POLICY IN THE FRENCH NATIONALIZED INDUSTRIES,
Abstract
Welfare economics has produced no theorems prescribing Pareto-optimal behavior for public monopolies operating under all the constraints which face the French nationalized industries and departing in their many ways from the smooth, certain world of existing theory. The closest that theorists have come is to obtain rules for some of the important decisions under one of the major current constraints (balanced budgets) when the rest of the economy is perfectly competitive; to approximate even these rules requires calculations infeasible at present. But pricing, investment, and other decisions must be made here and now. The ideal solutions of welfare economics, appropriately touched up to meet the constraints, and approximated to the extent that analytical resources allow, have provided, in the French experience, usable investment and pricing procedures; in at least one major case (the Tarif Vert) there can be little dispute that the result has been an improvement over previous practice. There is hoped that similar improvement in pricing will occur in time in the other industries. With respect of investment choices, there is massive agreement that present-value rankings made for several interesting discount rates are better than any alternative practical procedures; the rankings certainly compare favorable with analyses actually used in the past for investment choices in government water resource development in the US. Had there been a great deal of worrying over the shortcomings of the ideal solutions compared to more realistic secondbest solutions, or over the distributive effects of policy changes, these pricing and investment procedures might never have been developed.
Document Details
- Document Type
- Technical Report
- Publication Date
- Jan 15, 1960
- Accession Number
- AD0616428
Entities
People
- Thomas A. Marschak
Organizations
- RAND Corporation