r~sources
cannot be subject to exchange in a market and they have
therefore, in general, been transferred at zero price.
This is not
because they are not scarce relative to demand or because they con6
fer no service to the user but simp1y because there exists no social institution which wou1d permit these resources to be "owned" and exchanged in the market. Thus, the user of a "connnon property" resource does not in his decision take into account the costs he imposes on others.
In economic
terminology the use of the resources is said to cause "technological externa1 diseconomies".
This problem is not a new one in economics
and the first references to it in the economic literature emerged as earlyas in the 1880's and the "c1assic" work by Pigou was origina11y published in 1920. 4 ) A characteristic of the analyses of techno1ogical external diseconomies that appeared in a 1arge
nu~ber
of artic1es
during the fifties and sixties is that they dealt with externalities as comparatively minor
aberration~
from optimum situations in com-
petitive markets and that they limit themselves to a discussion of externa1ities between two parties. 5 ) In our previous discussion, where production and consumption activities were described within the framework of the materia1sbalance concept, it was pointed out that the generation (and possib1e discharge) of residuals in production and consumption processes must be regarded as a more or less inevitable side-effect of these processes.
The externa1 effects associated with the discharge of such
residuals are in no way exceptiona1 cases that can be dea1t with adequate1y through simple ad hoc arrangements - they are, on the contrary, rather pervasive features of the economy.
Another characteristic fea-
ture of these externa1ities is that the number of individuals affected genera11y is quite large and the lack of realism in the assumptions under1ying discussions of two party externa1ities therefore limit their direct uti1ity for policy reconnnendations.
This "weakness" (from a
4) Sidgwick, H., Principles of Political Economy, London, 1883, and Pigou, A.C., The Economics of We1fare, London, 1920. 5) See for examp1e, Scitovsky, T., "Two Concepts of Externa1 Economies", Journal of Political Economy, April 1954; Coase, R., "The Problem of Social Cast", Journal of Law and Economics, Vol. III, October 1961; Davies, O.A. & Whinston, A.B., "Externalities, We1fare and the Theory of Games", Journal of Political Economy, June 1962; Buchanan, J.M. & Stubb1ebine, W.S., "Externality", Economica, August 1963; Turvey, R., "On Divergencies Between Social Cost and Private Cost", Economica, August 1963.
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