1. Detrimental Externalities and Non-Convexity of the Production Set.
- Author
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Baumol, W.J. and Bradford, David F.
- Subjects
EXTERNALITIES ,CONVEX sets ,GRAPHIC methods ,ECONOMIC policy ,ECONOMETRIC models ,MACROECONOMICS ,WELFARE economics - Abstract
This paper undertakes to show that detrimental externalities tend to induce non-convexity of the social production possibility set. In particular we show that if externalities are sufficiently strong, convexity conditions must break down.
It is not our objective here to review in any detail the difficulties caused by non-convexity. Some of these consequences have long been recognized and are widely known.[2] However, until the recent appearance of papers by Starett [8], Portes [5], Kolm [3] and Baumol [2], it was apparently not recognized that externalities themselves are a source of non-convexity. These more recent writings suggest more than one connection between the two phenomena. However, one particularly straight-forward relationship seems to have received little or no attention. With sufficiently strong interactive effects non-convexity follows from the simple fact that if either of two mutually interfering activities is operated at zero level the other suffers no hindrance. The goal of this paper is to explore this phenomenon and show very dearly how it is that sufficiently severe detrimental externalities of the form described and non-convexity necessarily go together. [ABSTRACT FROM AUTHOR]- Published
- 1972
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