IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Why markets do not fail. Buchanan on voluntary cooperation and externalities

Listed author(s):
  • Alain Marciano

During the 1950s and 1960s, many economists were convinced that externalities were a cause of “market failures” -- because individuals are not capable of internalizing the costs their actions impose to others -- and therefore that the intervention of the state was necessary to allow an efficient allocation of resources. The paper presents the analyses of an economist, James Buchanan, who systematically tried to show that externalities should not be viewed as a problem for market efficiency. The central argument Buchanan used to defend markets was the human propensity to internalise the external effects of their actions and to pay for the goods they consume. We describe the intellectual trajectory he followed from the early 1950s -- when he started to work on “spillover“ -- to the mid- 1960s to complete a consistent explanation of the efficiency of market mechanisms and private arrangements in presence of externalities. By adopting an historical perspective, we are able to show the remarkable consistency of Buchanan's claims about externalities, even though he developed them in a period when the views of economists on the question were changing dramatically.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: main text
Download Restriction: no

Paper provided by Center for the History of Political Economy in its series Center for the History of Political Economy Working Paper Series with number 2010-05.

in new window

Length: 46
Date of creation: 2010
Handle: RePEc:hec:heccee:2010-5
Contact details of provider: Postal:
Center for the History of Political Economy Box 90097 Durham, NC 27708-0097

Phone: (919) 660-6899
Web page:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hec:heccee:2010-5. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Center for the History of Political Economy Webmaster)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.