The theory of the Second Best (secondarybest solution) is a beginning of the economic science, which concerns itself with the acting of the state with market failure. National action potential exists therefore everywhere, where the market exhibits at least a constant distortion. Examples for this are natural monopolies or negative external effects, which are not reflected in the price of a property.

The Second Best criterion assumes the fulfilment of large a number of efficiency conditions as possible is not appropriate, if a constant distortion is already present. Instead the welfare loss for the society can be minimized, as the state distorts other efficiency conditions accordingly.

Therefore the tasks of the state lie first in the procurement from information to the kind and the extent of the market failure, as well as in the elaboration of the necessary subsequent distortions. At this point also the criticism at the Second Best sets beginning: On the one hand it is connected with high transaction costs, on the other hand one the information, which is present the state, is often only insufficient. Therefore a policy of the Second Best obtains frequently only "a third-best "result.

See also

• Market failure
• natural monopoly
• Public Choice
• State failure

Articles in category "Second best"

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• IMDb: Second Best
  Second Best - Cast, Crew, Reviews, Plot Summary, Comments, Discussion, Taglines, Trailers, Posters, Photos, Showtimes, Link to Official Site, Fan Sites.


• Second Best (2004)
  Second Best - Cast, Crew, Reviews, Plot Summary, Comments, Discussion, Taglines, Trailers, Posters, Photos, Showtimes, Link to Official Site, Fan Sites.


• The Second Best Page in the Universe
  There has been a lot of needless talk about this subject and it frustrates me how much time is being wasted. Here is the official list, ranked best to... ...