The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

External Economies

  • Peter Bohm
Reference work entry


External economies and diseconomies nowadays generally mean unpaid side effects of one producer’s output or inputs on other producers. External economies in this sense imply as a rule that market prices in a competitive market economy will not reflect marginal social costs of production, giving rise to a ‘market failure’. But, with technological external economies and diseconomies now most often replaced by the well-defined concept of externality, and with pecuniary external economies and diseconomies being synonymous with general market interdependence, external economies no longer have much of a role to play in economic analysis.


Balanced growth Division of labour External economies Externalities Investment criteria Knight, F. H. Linkages Market failure Marshall, A. Pecuniary external economies Pigou, A. C. Robertson, D. H. Scitovsky, T. Technological external economies Young, A. A. 
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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Peter Bohm
    • 1
  1. 1.