Externality: Origins and Classifications
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Shopping Externalities and Self-Fulfilling Unemployment Fluctuations
NBER WORKING PAPER SERIES SHOPPING EXTERNALITIES AND SELF-FULFILLING UNEMPLOYMENT FLUCTUATIONS Greg Kaplan Guido Menzio Working Paper 18777 http://www.nber.org/papers/w18777 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 February 2013 We thank the Kielts-Nielsen Data Center at the University of Chicago Booth School of Business for providing access to the Kielts-Nielsen Consumer Panel Dataset. We thank the editor, Harald Uhlig, and three anonymous referees for insightful and detailed suggestions that helped us revising the paper. We are also grateful to Mark Aguiar, Jim Albrecht, Michele Boldrin, Russ Cooper, Ben Eden, Chris Edmond, Roger Farmer, Veronica Guerrieri, Bob Hall, Erik Hurst, Martin Schneider, Venky Venkateswaran, Susan Vroman, Steve Williamson and Randy Wright for many useful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer- reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications. © 2013 by Greg Kaplan and Guido Menzio. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Shopping Externalities and Self-Fulfilling Unemployment Fluctuations Greg Kaplan and Guido Menzio NBER Working Paper No. 18777 February 2013, Revised October 2013 JEL No. D11,D21,D43,E32 ABSTRACT We propose a novel theory of self-fulfilling unemployment fluctuations. According to this theory, a firm hiring an additional worker creates positive external effects on other firms, as a worker has more income to spend and less time to search for low prices when he is employed than when he is unemployed. -
AC Pigou and the Birth of Welfare Economics
David Campbell, Lancaster University Law School Ian Kumekawa, The First Serious Optimist: AC Pigou and the Birth of Welfare Economics, Princeton NJ: Princeton University Press, 2017, pp x, 332, hbk, isbn 978-0-691-16348-2, £27.95 In 1920, the year in which his most important work, The Economics of Welfare, appeared, Arthur Cecil Pigou (1877-1959), Professor of Political Economy in the University of Cambridge (1908-43), arguably was the most influential economist in the world. Leaving aside his important service to the teaching of economics and his being what would now be called a public intellectual, Pigou made important theoretical contributions to a wide range of topics. But it is on his formulation of the economics of piecemeal intervention, and in particular of the concept of the externality as a rationale of such intervention, that his contemporary significance, and interest to the readers of this journal, rests. Economists had, of course, been concerned with social problems prior to Pigou – his predecessors in the ‘Cambridge School’ of economics, Henry Sidgwick (20) and Alfred Marshall (29), were prominent in this regard - and previously had reasoned on the basis of something like the externality – Adam Smith certainly did so. But it was Pigou who placed all this on a unified theoretical basis, which, in part because of the influence of his usage, is now known as welfare economics. The terms in which Pigou formulated the externality, of a divergence between the private and social net products of an investment, has fallen into desuetude, and not only is none of the modern terminology of welfare economics – social welfare function, social cost, market failure, public goods, indeed the externality itself – due to Pigou, but those economics were developed in ways which often treated his specific approach as obsolete (163-64, 199). -
Learning Externalities and Economic Growth
Learning Externalities and Economic Growth Alejandro M. Rodriguez∗ August 2004 ∗I would like to thank Profesor Robert E. Lucas for motivating me to write this paper and for his helpful comments. Profesor Alvarez also provided some useful insights. Please send comments to [email protected]. All errors are mine. ABSTRACT It is a well known fact that not all countries develop at the same time. The industrial revolution began over 200 years ago in England and has been spreading over the world ever since. In their paper Barriers to Riches, Parente and Prescott notice that countries that enter the industrial stage later on grow faster than what the early starters did. I present a simple model with learning externalities that generates this kind of behavior. I follow Lucas (1998) and solve the optimization problem of the representative agent under the assumption that the external effect is given by the world leader’s human capital. 70 60 50 40 30 20 Number of years to double income 10 0 1820 1840 1860 1880 1900 1920 1940 1960 1980 Year income reached 2,000 (1990 U.S. $) Fig. 1. Growth patterns from Parente and Prescott 1. Introduction In Barriers to Riches, Parente and Prescott observe that ”Countries reaching a given level of income at a later date typically double that level in a shorter time ” To support this conclusion they present Figure 1 Figure 1 shows the year in which a country reached the per capita income level of 2,000 of 1990 U.S. dollars and the number of years it took that country to double its per capita income to 4,000 of 1990 U.S. -
Public Goods for Economic Development
Printed in Austria Sales No. E.08.II.B36 V.08-57150—November 2008—1,000 ISBN 978-92-1-106444-5 Public goods for economic development PUBLIC GOODS FOR ECONOMIC DEVELOPMENT FOR ECONOMIC GOODS PUBLIC This publication addresses factors that promote or inhibit successful provision of the four key international public goods: fi nancial stability, international trade regime, international diffusion of technological knowledge and global environment. Each of these public goods presents global challenges and potential remedies to promote economic development. Without these goods, developing countries are unable to compete, prosper or attract capital from abroad. The undersupply of these goods may affect prospects for economic development, threatening global economic stability, peace and prosperity. The need for public goods provision is also recognized by the Millennium Development Goals, internationally agreed goals and targets for knowledge, health, governance and environmental public goods. Because of the characteristics of public goods, leaving their provision to market forces will result in their under provision with respect to socially desirable levels. Coordinated social actions are therefore necessary to mobilize collective response in line with socially desirable objectives and with areas of comparative advantage and value added. International public goods for development will grow in importance over the coming decades as globalization intensifi es. Corrective policies hinge on the goods’ properties. There is no single prescription; rather, different kinds of international public goods require different kinds of policies and institutional arrangements. The Report addresses the nature of these policies and institutions using the modern principles of collective action. UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Vienna International Centre, P.O. -
Lodz Economics Working Papers
L odz E conomic s W orking P apers ALFRED MARSHALL’S PUZZLES. BETWEEN ECONOMICS AS A POSITIVE SCIENCE AND ECONOMIC CHIVALRY Joanna Dzionek-Kozłowska 5/2015 Joanna Dzionek-Kozłowska Faculty of Economics and Sociology, University of Lodz Institute of Economics, Department of History of Economic Thought and Economic History email: [email protected] Alfred Marshall’s Puzzles. Between Economics as a Positive Science and Economic Chivalry Abstract: Alfred Marshall’s approach to economics hides a paradox. On one hand, the ‘father’ of neoclassical economics strongly favoured conducting economics as a positive science. However, the fact that Marshall was such a consistent and determined advocate of this ideal of economic research is puzzling for at least two reasons. Firstly, even a quick glance at his publications allows to notice that his texts are sated with moral teachings. What is more, in referring to the problems of economic policy he not only took into account ethical aspects, but also frequently gave pre-eminence to ethical arguments over conclusions stemming from research grounded solely on the theory of economics. The paper aims to explain the paradox and argues that the complexity of Marshall’s approach arises from his attempts to combine two approaches pointed by Amartya Sen of binding economics and ethics over the centuries: ‘the ethics-related tradition’ with ‘the engineering approach’. JEL Codes: B31, M14 Keywords: Alfred Marshall, positive economics, normative economics, ethics and economics, economic chivalry 1 Introduction Marshall’s approach to economics hides a paradox. On one hand, the ‘father’ of neoclassical economics, who usually shunned explicit statements on the methodological issues, favoured in a straightforward way conducting economics as a positive science. -
Working Paper
WP 2020-12 December 2020 Working Paper Charles H. Dyson School of Applied Economics and Management Cornell University, Ithaca, New York 14853-7801 USA Social Externalities and Economic Analysis Marc Fleurbaey, Ravi Kanbur, and Brody Viney It is the Policy of Cornell University actively to support equality of educational and employment opportunity. No person shall be denied admission to any educational program or activity or be denied employmen t on the basis of any legally prohibited discrimination involving, but not limited to, such factors as race, color, creed, religion, national or ethnic origin, sex, age or handicap. The University is committed to the maintenance of affirmative action prog rams which will assure the continuation of such equality of opportunity. 2 Social Externalities and Economic Analysis Marc Fleurbaey, Ravi Kanbur, Brody Viney ThisThis version: versio Augustn: Aug 6,us 2020t 6, 20201 Abstract This paper considers and assesses the concept of social externalities through human interdependence, in relation to the economic analysis of externalities in the tradition of Pigou and Arrow, including the analysis of the commons. It argues that there are limits to economic analysis. Our proposal is to enlarge the perspective and start thinking about a broader framework in which any pattern of influence of an agent or a group of agents over a third party, which is not mediated by any economic, social, or psychological mechanism guaranteeing the alignment of the marginal net private benefit with marginal net social benefit, can be attached the “externality” label and be scrutinized for the likely negative consequences that result from the divergence .These consequences may be significant given the many interactions between the social and economic realms, and the scope for spillovers and feedback loops to emerge. -
“Exceptional and Unimportant”? Externalities, Competitive Equilibrium, and the Myth of a Pigovian Tradition
“Exceptional and Unimportant”? Externalities, Competitive Equilibrium, and the Myth of a Pigovian Tradition Steven G. Medema* Version 2.3 January 2019 Forthcoming, History of Political Economy * University Distinguished Professor of Economics, University of Colorado Denver. Email: [email protected]. The author has benefitted greatly from comments on earlier drafts of this paper provided by Roger Backhouse, Nathalie Berta, Ross Emmett, Kenji Fujii, Kerry Krutilla, Alain Marciano, Norikazu Takami, participants in the CHOPE workshop at Duke University, the editor, and two anonymous referees. The financial support provided by the National Endowment for the Humanities, the Earhart Foundation, the Institute for New Economic Thinking, and the University of Colorado Denver is gratefully acknowledged. “Exceptional and Unimportant”? Externalities, Competitive Equilibrium, and the Myth of a Pigovian Tradition I. Introduction Economists typically locate the origins of the theory of externalities in A.C. Pigou’s The Economics of Welfare (1920), where Pigou suggested that activities which generate uncompensated benefits or costs—e.g., pollution, lighthouses, scientific research— represent instances of market failure requiring government corrective action.1 According to this history, Pigou’s effort gave rise to an unbroken Pigovian tradition in externality theory that continues to exert a substantial presence in the literature to this day, even with the stiff criticisms of it laid down by Ronald Coase (1960) and others beginning in the 1960s.2 This paper challenges that view. It demonstrates that, in the aftermath of the publication of The Economics of Welfare, economists paid almost no attention to externalities. On the rare occasions when externalities were mentioned, it was in the context of whether a competitive equilibrium could produce an efficient allocation of resources and to note that externalities were an impediment to the attainment of the optimum. -
Exports and Externalities: the Other Side of Trade and Ecological Risk
University of Heidelberg Department of Economics Discussion Paper Series No. 481 Exports and Externalities: the other side of trade and ecological risk Travis Warziniack, David Finnoff, Jason F. Shogren, Jonathan Bossenbroek, and David Lodge April 2009 Exports and Externalities: the other side of trade and ecological risk∗ Travis Warziniack,y David Finnoff and Jason F Shogren,z Jonathan Bossenbroek,xDavid Lodge{ Abstract This paper develops a general equilibrium model to measure welfare effects of taxes for correcting environmental externalities caused by domestic trade, focusing on exter- nalities that arise through exports. Externalities from exports come from a number of sources. Domestically owned ships, planes, and automobiles can become contaminated while visiting other regions and bring unwanted pests home, and species can be in- troduced by contaminated visitors that enter a region to consume goods and services. The paper combines insights from the public finance literature on corrective environ- mental taxes and trade literature on domestically provided services. We find that past methods for measuring welfare effects are inadequate for a wide range of externalities and show the most widely used corrective mechanism, taxes on the sector imposing the environmental externality, may often do more harm than good. The motivation for this ∗Thanks to ISIS team members (http://www.math.ualberta.ca/ mathbio/ISIS/), grants from the Na- tional Sea Grant network, and the NSF (DEB 02-13698) for financial support. yUniversity of Heidelberg, Bergheimer Strasse 20, 69115 Heidelberg, Germany; [email protected] heidelberg.de zUniversity of Wyoming xUniversity of Toledo {University of Notre Dame 1 paper is the expansion of invasive species' ranges within the United States. -
Karl Marx's Thoughts on Functional Income Distribution - a Critical Analysis
A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Herr, Hansjörg Working Paper Karl Marx's thoughts on functional income distribution - a critical analysis Working Paper, No. 101/2018 Provided in Cooperation with: Berlin Institute for International Political Economy (IPE) Suggested Citation: Herr, Hansjörg (2018) : Karl Marx's thoughts on functional income distribution - a critical analysis, Working Paper, No. 101/2018, Hochschule für Wirtschaft und Recht Berlin, Institute for International Political Economy (IPE), Berlin This Version is available at: http://hdl.handle.net/10419/175885 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu Institute for International Political Economy Berlin Karl Marx’s thoughts on functional income distribution – a critical analysis Author: Hansjörg Herr Working Paper, No. -
Those Outsiders: How Downstream Externalities Affect Public Good Provision
Those Outsiders: How Downstream Externalities Affect Public Good Provision Jason Delaney Sarah Jacobson Department of Economics and Finance Department of Economics University of Arkansas at Little Rock Williams College 322 Reynolds Business Center 24 Hopkins Hall Dr. 2801 S. University Ave. Williamstown, MA 01267 Little Rock, AR 72204 [email protected] [email protected] Phone: 413-597-2476 Phone: 501-569-8874 Fax: 413-597-4045 Fax: 501-569-8871 January 2012 Abstract: Some policy problems pit the interests of one group against those of another group. One group may, for example, determine the provision of a project (such as a power plant or a dam) that benefits group members but has downstream externalities that hurt people outside the group. We introduce a model of projects with such asymmetries. In-group members may contribute to a common fund that benefits them as a public good. In the model, benefits from the project may or may not vary within the group. Project provision has negative downstream externalities: common fund contributions hurt agents outside the in-group (“Outsiders”) rendering common fund contributions anti-social overall. Many models of social preferences predict that such externalities should reduce or eliminate project provision, although conditional cooperation or a preference for in-group members may counteract this effect. We test this model with a lab experiment. With homogeneous in-group benefits, the presence of negative downstream externalities reduces contribution levels by nearly half. We introduce a rotating high-return position that allows subjects to trade favors. Contributions diminish only slightly with the introduction of the negative externality and reciprocal giving occurs whether or not Outsiders are present. -
The Future of Economics in a Lakatos–Bourdieu Framework
Munich Personal RePEc Archive The Future of Economics in a Lakatos–Bourdieu Framework. Heise, Arne University of Hamburg 2014 Online at https://mpra.ub.uni-muenchen.de/80024/ MPRA Paper No. 80024, posted 05 Jul 2017 05:42 UTC The Future of Economics in a Lakatos-Bourdieu framework Prof. Arne Heise University of Hamburg Dep. of Socioeconomics VMP 9 D-20146 Hamburg [email protected] Abstract The global financial crisis has clearly been a matter of great consternation for the busi- ness-as-usual faction of mainstream economics. Will the World Financial Crisis turn out to be that ‘experimentum crucis’ which triggered a scientific revolution? In this paper, we seek to assess the likelihood of a paradigm shift towards heterodox approaches and a more pluralist setting in economics emerging from the academic establishment in the U.S. – that is, from the dominant center of knowledge production in the economic disci- pline. This will be done by building the analysis on a combined Lakatosian framework of ‘battle of research programmes’ and a Bourdieuian framework of ‘power struggle’ within the academic field and highlighting the likelihood of two main proponents of the mainstream elite to become the promulgator of change? Keywords: Paradigm, heterodox economics, scientific revolution JEL codes: A 11, E 11, E 12 1 1. The Keynesian Revolution and Pragmatic Pluralism – A Fruitful Competition Between Theories or a Crisis in Economics? John Maynard Keynes concludes ‘The General Theory of Employment, Interest, and Money’ (1936: 383-84) with the following, now-famous words: „At the present moment people are unusually expectant of a more funda- mental diagnosis; more particularly ready to receive it; eager to try it out, if it should be even possible. -
Sustainability Through the Lens of Environmental Sociology: an Introduction
sustainability Editorial Sustainability through the Lens of Environmental Sociology: An Introduction Md Saidul Islam Division of Sociology, Nanyang Technological University Singapore, 14 Nanyang Drive, Singapore 637332, Singapore; [email protected]; Tel.: +65-6592-1519 Academic Editor: Marc A. Rosen Received: 10 March 2017; Accepted: 15 March 2017; Published: 22 March 2017 Abstract: Our planet is undergoing radical environmental and social changes. Sustainability has now been put into question by, for example, our consumption patterns, loss of biodiversity, depletion of resources, and exploitative power relations. With apparent ecological and social limits to globalization and development, current levels of consumption are known to be unsustainable, inequitable, and inaccessible to the majority of humans. Understanding and achieving sustainability is a crucial matter at a time when our planet is in peril—environmentally, economically, socially, and politically. Since its official inception in the 1970s, environmental sociology has provided a powerful lens to understanding the challenges, possibilities, and modes of sustainability. This editorial, accompanying the Special Issue on “sustainability through the Lens of Environmental Sociology”, first highlights the evolution of environmental sociology as a distinct field of inquiry, focusing on how it addresses the environmental challenges of our time. It then adumbrates the rich theoretical traditions of environmental sociology, and finally examines sustainability through the lens of environmental sociology, referring to various case studies and empirical analyses. Keywords: environmentalism; environmental sociology; ecological modernization; treadmill of production; the earth day; green movement; environmental certification; global agro-food system 1. Introduction: Environmental Sociology as a Field of Inquiry Environmental sociology is the study of how social and ecological systems interact with one another.