Externalities and the Limits of Markets

Martin Kolmar ()
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Martin Kolmar: University of St. Gallen

Chapter 6 in Principles of Microeconomics, 2017, pp 99-141 from Springer

Abstract: Abstract This chapter covers … the implicit assumptions underlying the assertion that competitive markets are efficient. the concepts of interdependency and externality and how they contribute towards understanding the problem of how to organize economic activities and the role of markets. the concept of transaction cost and why it is important to not only understand limitations of markets, but also the firms and the state as alternative means to organizing economic activities. how to apply the concept of transaction costs to understanding how specific markets have to be regulated. the relationship between externalities, common goods and public goods, and why these types of goods may justify state interventions beyond property rights enforcement, contract law and market regulation. a lot about climate change, why status concerns make one unhappy, and the social responsibilities of firms.

Date: 2017
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DOI: 10.1007/978-3-319-57589-6_6

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