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The residual character of externalities

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  • Maurice Lagueux

Abstract

This paper claims that the term 'externality' designates a residual entity that corresponds to what is left aside by the market. Fluctuations in the importance granted to externalities reflect fluctuations in the place granted to the market. In the first half of the twentieth century, externalities were judged unimportant. Later, they became pervasive. This radically changed in the 1960s through a redefinition of the market largely based on Ronald Coase's views on transaction costs. The paper analyses these fluctuations in the economists' understanding of externalities and proposes a way of clearly distinguishing externalities from what is internal to the market.

Suggested Citation

  • Maurice Lagueux, 2010. "The residual character of externalities," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 17(4), pages 957-973.
    • Handle: RePEc:taf:eujhet:v:17:y:2010:i:4:p:957-973
    DOI: 10.1080/09672560903552538
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    References listed on IDEAS

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    1. Dahlman, Carl J, 1979. "The Problem of Externality," Journal of Law and Economics, University of Chicago Press, vol. 22(1), pages 141-162, April.
    2. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    3. Tibor Scitovsky, 1954. "Two Concepts of External Economies," Journal of Political Economy, University of Chicago Press, vol. 62(2), pages 143-143.
    4. Francis M. Bator, 1958. "The Anatomy of Market Failure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 72(3), pages 351-379.
    5. F. H. Knight, 1924. "Some Fallacies in the Interpretation of Social Cost," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 38(4), pages 582-606.
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    Cited by:

    1. Nathalie Berta, 2016. "On the definition of externality as a missing market," Post-Print halshs-01277990, HAL.
    2. Nathalie Berta, 2016. "On the definition of externality as a missing market," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01277990, HAL.
    3. Nathalie Berta, 2017. "On the definition of externality as a missing market," Post-Print hal-02095696, HAL.
    4. Nathalie Berta, 2016. "On the definition of externality as a missing market," Documents de travail du Centre d'Economie de la Sorbonne 16007, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.

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