Using and Abusing Economic Theory

32 Pages Posted: 29 Apr 2003

See all articles by Paul Klemperer

Paul Klemperer

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

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Date Written: March 2003

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: Economic theory, methodology, auctions, bidding, auction theory, spectrum auctions, telecommunications, UMTS, 3G, mobile-phones

JEL Classification: D44, L96

Suggested Citation

Klemperer, Paul, Using and Abusing Economic Theory (March 2003). Available at SSRN: https://ssrn.com/abstract=400560

Paul Klemperer (Contact Author)

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Centre for Economic Policy Research (CEPR) ( email )

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