Using the Environment—An Allocation Problem

  • Horst Siebert


Technological externalities are nonmarket interdependencies among economic activities. Consider, for example, two production activities i and j. An externality exists if the output Q i in activity i depends on the output Q j or on the inputs R j of the other activity.


Public Good Allocation Problem Abatement Cost Negative Externality Damage Function 
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  1. 1.
    Th. Veblen, The Theory of the Leisure Class ( London: Allen and Unwin, 1925 ).Google Scholar
  2. 2.
    The analysis of externalities clearly benefits from the explicit introduction of the technological system by which economic activities are interrelated. More specifically, technological externalities imply a technological system; an interdependence via markets including future markets does not constitute a technological, but a “pecuniary externality”.Google Scholar
  3. 3.
    In the following text, we use the term environmental quality for simplifying purposes, although the public good environment definitively has a quantitative characteristic, for instance pounds of oxygen consumed.Google Scholar
  4. 4.
    Compare K. Lancaster, “Change and Innovation in the Technology of Consumption,” in: The American Economic Review ( Menasha, Wis.: American Economic Association, 1966 ), pp. 14–23.Google Scholar
  5. 5.
    The implications of the transformation of mass into energy in the mass-balance concept are not discussed. Also compare the problem of entropy, see Faber et al. (1983).Google Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 1992

Authors and Affiliations

  • Horst Siebert
    • 1
  1. 1.Kiel Institute of World EconomicsKiel 1Germany

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