![]() ![]() 2 In Part 3, we engage the hypothesis noted above regarding abundance. In Part 2, we discuss the economics of externalities with these facts and the interdisciplinary audience of this journal in mind. Economics generally acknowledges these facts. Nonetheless, which resources are scarce and to what degree does change over time and is a critical issue. ![]() ![]() Scarcity cannot be eliminated, and thus, a “world without scarcity” will never exist and can only be theorized. 1 But we mention it because it is relevant to understanding how externalities and corresponding governance institutions work and matter differently in a world of scarcity vs. This unavoidable fact adds a layer of complexity to the analysis that we do not fully describe in this paper and thus leave for other work. Yet governance institutions, which are by no means limited in focus to internalizing externalities, are themselves socially constructed resources that comprise and shape the built environments within which people live and develop their beliefs, preferences, and capabilities. As institutional economists recognize, externalities and institutions are inexorably intertwined. We explain that externalities (i) are system-independent, (ii) always concern the interdependent and functional relationships between people and environments (resources, both natural and built), (iii) vary according to the set of values people have, and (iv) often, though not always, give rise to social demand for governance. Not surprisingly, a bad heuristic can lead to bad prescriptions to remedy supposed failures.īefore we examine how externalities work and matter in worlds with varying degrees of scarcity and abundance, we provide a series of clarifications to help avoid the problems that plague conventional theories. Furthermore, externalities sometimes are not primarily about markets failing (or succeeding) but instead concern political or other social systems failing (or succeeding) (Claassen, 2016). In reality: Externalities are sometimes evidence of market failure and other times evidence of market success. As we explain below, this is a bad heuristic. For example, economists often consider externalities to be a prime example of market failure (Papandreou, 1994). Unfortunately, the externality concept is easily confused in making prescriptions. The concept of externality, an important idea in economics and law, is useful in exploring the complex and dynamic relationships between resource supply and human flourishing within various sociotechnical systems. This inquiry forces us to interrogate the conventional economics of externalities. Instead, we presume there is some inevitable truth to the generic claim, which anyone living in the twenty-first century can appreciate, and focus more directly on understanding the mechanisms, namely, in how scarcity and abundance of knowledge resources shapes political, economic, and social systems and, as we shall see, vice versa. ![]() This article does not empirically test this rather broad claim. a world of abundance? Over the past decade, many prominent scholars and thought leaders have argued (hypothesized) that increasing abundance of various types of knowledge resources and the technological means for participating in the production, dissemination, and modification of such resources will lead to substantial impacts, changes, and even disruptive transformation of existing political, economic, and social systems. Do externalities work and matter differently in a world of scarcity vs. ![]()
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