Toward a theory of optimal economic systems

This paper develops a framework for theoretical analysis of optimal economic systems that synthesizes and extends many common themes found in the works of both theorists and comparativists. An economy's institutional characteristics are abstractly represented by three structures (the information, decision-making, and incentive structures) comprising the economic system. Attention is given to the fact that economic systems influence both the objective functions of, and the strategies employed by, an economy's members. Existence theorems on optimal economic systems are presented to show that the framework is not vacuous and to illustrate the problems involved in selecting an optimal economic system.