Dwight M. Jaffee, Thomas Russell; Imperfect Information, Uncertainty, and Credit Rationing: A Reply*, The Quarterly Journal of Economics, Volume 99, Issue 4, 1

This paper explores a model where private charity and public transfers are determined simultaneously. In political equilibrium, the government "overprovides" public transfers, transferring more to the poor than altruistic taxpayers prefer. At this equilibrium, private charity is zero. Evidence for this result is found by examining various types of data from the 1920s to the present. While private charity currently exceeds $50 billion, very little of it goes to the poor. I provide evidence that this phenomenon of zero private charity began, as the model predicts, in the 1930s, the beginning of federal intervention in the charity market.

This paper explores a model where private charity and public transfers are determined simultaneously. In political equilibrium, the government "overprovides" public transfers, transferring more to the poor than altruistic taxpayers prefer. At this equilibrium, private charity is zero. Evidence for this result is found by examining various types of data from the 1920s to the present. While private charity currently exceeds $50 billion, very little of it goes to the poor. I provide evidence that this phenomenon of zero private charity began, as the model predicts, in the 1930s, the beginning of federal intervention in the charity market.

Recent developments in the economics of information emphasize the informational content of prices. We examine the degree to which prices convey information on product quality to uninformed agents. Under perfect competition, we show that a rational expectations equilibrium may not exist. When an equilibrium does exist, the information on quality conveyed by prices depends on the shape of the average cost curves and the relative numbers of informed and uniformed agents.