Abstract
Externality has been, and is, central to the neo-classical critique of market organisation. In its various forms – external economies and diseconomies, divergencies between marginal social and marginal private cost or product, spillover and neighbourhood effects, collective or public goods – externality dominates theoretical welfare economics, and, in one sense, the theory of economic policy generally. Despite this importance and emphasis, rigorous definitions of the concept itself are not readily available in the literature. As Scitovosky has noted, “definitions of external economies are few and unsatisfactory”.1 The following seems typical:
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Notes
Tibor Scitovosky, “Two Concepts of External Economies”, Journal of Political Economy, vol. LXII (1954), p. 143.
James M. Buchanan, “Politics, Policy, and the Pigovian Margins”, Economica, vol. XXVIX (1962), pp. 17–28
J. R. Hicks, “The Four Consumer’s Surpluses”, Review of Economic Studies, vol. XI (1943), pp. 31–41.
R. H. Coase; see his “The Problem of Social Cost”, Journal of Law and Economics, vol. III (1960), pp. 1–44.
Paul A. Samuelson, “The Pure Theory of Public Expenditure”, Review of Economics and Statistics, vol. XXXVI (1954), pp. 386–9.
Otto Davis and Andrew Whinston, “Externalities, Welfare, and the Theory of Games”, Journal of Political Economy, vol. LXX (1962), pp. 241–62.
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© 1962 Basil Blackwell Ltd
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Buchanan, J.M., Stubblebine, W.C. (1962). Externality. In: Gopalakrishnan, C. (eds) Classic Papers in Natural Resource Economics. Palgrave Macmillan, London. https://doi.org/10.1057/9780230523210_7
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DOI: https://doi.org/10.1057/9780230523210_7
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