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On the definition of externality as a missing market

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  • Nathalie Berta

    (REGARDS - Recherches en Économie Gestion AgroRessources Durabilité Santé- EA 6292 - URCA - Université de Reims Champagne-Ardenne - MSH-URCA - Maison des Sciences Humaines de Champagne-Ardenne - URCA - Université de Reims Champagne-Ardenne)

Abstract

Within the general equilibrium framework, externalities are regarded as missing markets which invalidate the first theorem of welfare economics. As witnessed by some authors' positions in the 1970s, this definition does not highlight whether or not it is an exogenous and an unintended effect. These ambiguities raise the issue of the relation between the basic formalisation of an externality (a dependence of individual objective functions) and its economic meaning (a missing market). Finally, they also raise the more general issue of the dilution of externality in the larger notion of individual interaction.

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  • Nathalie Berta, 2017. "On the definition of externality as a missing market," Post-Print hal-02095696, HAL.
  • Handle: RePEc:hal:journl:hal-02095696
    DOI: 10.1080/09672567.2016.1169304
    Note: View the original document on HAL open archive server: https://hal.univ-reims.fr/hal-02095696
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    References listed on IDEAS

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    1. Berta, Nathalie, 2020. "Efficiency without Optimality: A Pragmatic Compromise for Environmental Policies in the Late 1960s," OSF Preprints wp2xf, Center for Open Science.

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