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?


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