How does Joseph Stiglitz and Greenwald explain why markets with imperfect information fail to have a pareto efficient equilibrium? What premises do they use to come to that conclusion?
For example, they write:
"This suggests ... that if the government has no more information available to it than private firms ... it cannot make a Pareto improvement. This conclusion, however, is wrong. Taxes on goods or wages ... may change the extent of signaling"
But I don't see a logical (non-mathematical) explanation for their conclusion here. How can taxes change signaling to increase economic welfare?