… is from page 5 of the great Harold Demsetz’s insightful 2011 Review of Law & Economics article, “The Problem of Social Cost: What Problem? A Critique of the Reasoning of A.C. Pigou and R.H. Coase“:
I want to recognize Coase’s important demonstration that it makes no more sense to speak of A harming B than of B harming A when A and B seek to put the same scarce resource to competing uses. The history of prior discussion of the externality problem is replete with mistaken attribution of causation when the real source of the problem simply is resource scarcity.
DBx: No externality, so called, in a market setting is unilateral. All such ‘externalities’ are merely conflicts over the use of scarce resources.
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