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External Economies And Competitive Equilibrium, George A. Hay, John J. Mcgowan
External Economies And Competitive Equilibrium, George A. Hay, John J. Mcgowan
George A. Hay
In an article published in 1955, Murray Kemp analyzed the case for interference with the competitive allocation of resources when external economies of production are present. In the specific model we are interested in—where the costs of any one producer's operations are affected by the total output of all producers of the same product—Kemp attempted to show that where entry into the industry is closed (although the industry is otherwise perfectly competitive), "there can always be found a subsidy, either on the product or on a particular factor, which will be a sufficient incentive to firms to produce an optimal …
External Diseconomies In Competitive Supply: Comment, George A. Hay, John J. Mcgowan
External Diseconomies In Competitive Supply: Comment, George A. Hay, John J. Mcgowan
George A. Hay
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 …