The study “Redistribution Through Markets” was recently published in the journal Econometrica. This research reveals that free markets are optimal under some circumstances – but at other times price controls can be a better solution, especially when there is extreme societal inequality.
Dr. Piotr Dworczak, professor in the Department of Economics, as well as economists from Harvard and Stanford worked together to show that when inequality is significant it may be necessary for policymakers to distort prices to redistribute through the market – hence the title of the study.
“Classical economic theory suggests these sorts of regulations aren’t the best policy, but our paper shows that they can, in fact, be optimal,” explained Professor Dworczak.
This paper generated lots of engagement on Twitter with over 500 retweets and comments and roughly 230,000 views. This enthusiastic response is very encouraging to the authors. In a time when people are largely split on how they view the market system this research suggests a middle ground. It suggests the possibility, at least in principle, to structure markets in ways that improve equity.
Read more about Professor Piotr Dworcszak’s research on his website.