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Macroeconomics Commons

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Public Economics

1973

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Full-Text Articles in Macroeconomics

External Diseconomies In Competitive Supply: Comment, George A. Hay, John J. Mcgowan Sep 1973

External Diseconomies In Competitive Supply: Comment, George A. Hay, John J. Mcgowan

Cornell Law Faculty Publications

In a recent article in this Review, Charles Goetz and James Buchanan (G-B) assert that " . . . the standard description of misallocation in the presence of external production diseconomies is misleading . . . " because these externalities produce a ". . . combination of exchange-inefficiency with production-inefficiency [which ] renders the construction of correction devices much more difficult" (p. 889). Stated otherwise their contention is that with external diseconomies that are internal to an industry, i.e., those that each firm in an industry inflicts on other firms in the same industry, a competitive regime in the presence of a per unit tax on output designed to eliminate the ...