The New Palgrave Dictionary of Economics

Living Edition
| Editors: Palgrave Macmillan

Externalities

  • J. J. Laffont
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DOI: https://doi.org/10.1057/978-1-349-95121-5_126-1
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Abstract

Competitive equilibria are Pareto optimal when they exist if preferences are locally non-satiated and if externalities are not present in the economy. Why externalities upset the first fundamental theorem of welfare economics and which economic policies can remedy this failure are the major questions addressed below.

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References

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Copyright information

© The Author(s) 1987

Authors and Affiliations

  • J. J. Laffont
    • 1
  1. 1.