Abstract

http://ssrn.com/abstract=437221
 
 

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Irrelevant Internalities, Irrelevant Externalities, and Irrelevant Anxieties


David D. Haddock


Northwestern University - School of Law and Department of Economics; PERC - Property and Environment Research Center

August 14, 2003

Northwestern Law & Economics Research Paper No. 03-16

Abstract:     
Due to the high transaction cost that would be necessary for large numbers of people to negotiate with each other, even those who are sanguine about private markets become reserved when externalities affect large populations. The distinction between private and societal interest is well understood for pecuniary externalities, but neglect of Buchanan and Stubblebine's article Externality has left the same distinction widely unrecognized for non-pecuniary ones. If only a few parties on either side experience a relevant externality within Buchanan and Stubblebine's relevant/irrelevant distinction, private interactions can appropriately internalize costs and benefits across the entire population. Regardless of the perceptiveness of legal and cultural institutions in placing entitlements, and regardless of the level of transaction cost among the universe of the affected, a surprising number of externalities will readily fix themselves. The desirability of corrective intervention is much too easily conceded.

Number of Pages in PDF File: 34

Keywords: externality, externalities, positive externality, positive externalities, negative externality, negative externalities, relevant externality, irrelevant externality, relevant externalities, irrelevant externalities, Coase theorem, transaction cost, environment, amenities, collective goods, public goods, private goods, exclude, Nirvana fallacy, public policy, environmental policy, free rider, existence value, option value, Pigou, Pigouvian tax, Pigouvian subsidy, national park, strategic behavior, free market environmentalism, resource, misallocation, consumer surplus, producer surplus, pollution, Ronald Coase, James Buchanan, Stubblebine

JEL Classification: D6, D7, H1, H4, H7, K0, Q2, Q3

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Date posted: August 26, 2003  

Suggested Citation

Haddock, David D., Irrelevant Internalities, Irrelevant Externalities, and Irrelevant Anxieties (August 14, 2003). Northwestern Law & Economics Research Paper No. 03-16. Available at SSRN: http://ssrn.com/abstract=437221 or http://dx.doi.org/10.2139/ssrn.437221

Contact Information

David D. Haddock (Contact Author)
Northwestern University - School of Law and Department of Economics ( email )
375 E. Chicago Ave
Unit 1505
Chicago, IL 60611
United States
PERC - Property and Environment Research Center
2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

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