 Externality as a coordination problemPublic Choice, 2024, vol. 201, issue 3, No 7, 495-510 Abstract: Abstract Although externality is one of the basic concepts in economics, its rigorous definition remains elusive. This paper reconceptualizes externality as an instance of a broader phenomenon of incompatibility of plans—a situation where plans of different individuals cannot be materialized simultaneously because they compete for resources that are scarce. The plan incompatibility can be addressed by institutional arrangements involving mechanisms that determine which plans will be realized. Various institutional arrangements can be compared from the perspective of efficiency, operational costs, distributional effects, and other criteria. Regardless of the institutional arrangement, the spillover effects are unavoidable, as they are implied by scarcity. Therefore, the analysis of externalities should shift its focus from spillover effects to the mechanisms for allocating scarce resources among competing plans. Keywords: Externality; Incompatibility of plans; Scarcity; Comparative institutional analysis; Conflict; Coordination (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:kap:pubcho:v:201:y:2024:i:3:d:10.1007_s11127-023-01122-4 Ordering information: This journal article can be ordered from DOI: 10.1007/s11127-023-01122-4 Access Statistics for this article Public Choice is currently edited by WIlliam F. Shughart II More articles in Public Choice from Springer |
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