Pigou's Rationale for Intervention in Case of Externalities
Arthur Pigou's rationale for government intervention is based on the market failures caused by externalities. He argued that when externalities exist, they create a divergence between the private costs or benefits considered by an individual or firm and the total costs or benefits experienced by society. This discrepancy leads to an inefficient allocation of resources, which necessitates intervention to realign private incentives with social welfare.
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Ch.10 Market successes and failures: The societal effects of private decisions - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
Related
Pigouvian Tax (Definition)
Book: Wealth and Welfare by Arthur Pigou (1912)
Pigou's Focus on Broader Measures of Wellbeing
Pigou's Rationale for Intervention in Case of Externalities
The Theory of Unemployment by Arthur Pigou
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Bibliographic Reference: Arthur Pigou's 'The Economics of Welfare' (1920)
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Pigou's Rationale for Intervention in Case of Externalities
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Definition of External Effect (Externality)
External Economy (Positive Externality or External Benefit)
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Pigou's Rationale for Intervention in Case of Externalities
Private Cost (Definition)
Social Cost (Definition)
External Cost (Negative Externality or External Diseconomy)
Learn After
Pigouvian Tax (Definition)
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