Hostname: page-component-76fb5796d-dfsvx Total loading time: 0 Render date: 2024-04-26T05:43:47.541Z Has data issue: false hasContentIssue false
  • English
  • Français

INTRODUCTION TO MACROECONOMIC DYNAMICS SPECIAL ISSUE: PUBLIC POLICY, EXTERNALITIES, AND ECONOMIC GROWTH

Published online by Cambridge University Press:  20 September 2010

Stephen J. Turnovsky  and
Ronald Wendner
Stephen J. Turnovsky*
Affiliation:
University of Washington
Ronald Wendner
Affiliation:
University of Graz
*
Address correspondence to: Stephen J. Turnovsky, Department of Economics, University of Washington, Box 353330, Seattle, WA 98195, USA; e-mail: sturn@u.washington.edu.
Get access Rights & Permissions [Opens in a new window]

Extract

Externalities are a fundamental aspect of any modern interdependent economy. The fact that agents interact with one another makes it inevitable that their decisions will influence one another directly, in addition to any indirect impact that may occur through the market place. Ever since the earliest stages of the discipline, externalities have been of prime concern to economists, who have long argued that they provide an important motive for (economic) decision making. To cite one prominent example, in The Theory of Moral Sentiments, Adam Smith notes that “Though it is in order to supply the necessities and conveniences of the body that the advantages of external fortune are originally recommended to us, yet we cannot live long in the world without perceiving that the respect of our equals, our credit and rank in the society we live in, depend very much upon the degree in which we possess, or are supposed to possess those advantages. The desire of becoming the proper objects of this respect . . . is perhaps the strongest of all our desires” [Smith (1759, pp. 348–349)]. In modern terminology, Adam Smith is referring to a consumption externality.

Type
Introduction
Information
Macroeconomic Dynamics , Volume 14 , Supplement S2: Public Policy, Externalities, and Economic Growth , November 2010 , pp. 145 - 150
Copyright
Copyright © Cambridge University Press 2010

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Caballero, R.J. and Lyons, R.K. (1990) Internal versus external economies in European industry. European Economic Review 34, 805–830.CrossRefGoogle Scholar
Clark, A.E. and Oswald, A.J. (1996) Satisfaction and comparison income. Journal of Public Economics 61, 359–381.CrossRefGoogle Scholar
Duesenberry, J.S. (1949) Income, Saving, and the Theory of Consumer Behavior. Cambridge, MA: Harvard University Press.Google Scholar
Easterlin, R.A. (1973) Does money buy happiness? The Public Interest 30, 3–10.Google Scholar
Fehr, E. and Schmidt, K.M. (1999) A theory of fairness, competition, and cooperation. Quarterly Journal of Economics 114, 817–868.CrossRefGoogle Scholar
Frank, R. (1997) Happiness and economic performance. Economic Journal 107, 1815–1831.Google Scholar
Frankel, M. (1962) The production function in allocation and growth: A synthesis. American Economic Review 52, 995–1022.Google Scholar
Marshall, A. (1890) Principles of Economics. London: Macmillan.Google Scholar
Romer, P.M. (1986) Increasing return and long run growth. Journal of Political Economy 94, 1002–1037.CrossRefGoogle Scholar
Smith, A. (1759) The Theory of Moral Sentiments. Oxford, UK: Clarendon Press.CrossRefGoogle Scholar
Veblen, T.B. (1899) The Theory of the Leisure Class: An Economic Study of Institutions. New York: Modern Library.Google Scholar