Social externalities and economic analysis

Marc Fleurbaey (1, 2) , Ravi Kanbur (3) , Brody Viney (4)

1 PSE - Paris School of Economics
2 PJSE - Paris Jourdan Sciences Economiques
3 Cornell University [New York]
4 World Bank Group

This paper considers and assesses the concept of social externalities through human interdependence, in relation to the economic analysis of externalities in the tradition of Pigou and Arrow, including the analysis of the commons. It argues that there are limits to economic analysis. Our proposal is to enlarge the perspective and start thinking about a broader framework in which can be attached the "externality" label and be scrutinized for the likely negative consequences that result from the divergence. A tentative and probably incomplete list of possible internalizing mechanisms includes: pricing and monetary incentives; altruism and solidarity; moral norms; reciprocity and mutual monitoring; centralized cooperative decision-making; and merger. There are clear reasons why the pricing mechanism is not appropriate in some cases. A more difficult question to answer is what factors determine which of the mechanisms is the appropriate one to rely on in a given sphere of relations and activities. The object of the paper is to encourage research and contributions from all the relevant disciplines of social sciences about the pervasive human interdependence that the notion of social externalities tries to capture.

Mots clés: Externalities; Commons; Human Interdpendence; Social Externalities; InternalizingMechanisms; Ethical Principles

Domaines: Economies et finances

Marc Fleurbaey, Ravi Kanbur, Brody Viney. Social externalities and economic analysis. Social Research: An International Quarterly, 2021, 88 (1), pp.171-202. ⟨10.1353/sor.2021.0010⟩. ⟨hal-03426166⟩