The Market Mechanism, Externalities, and Land Economics

Abstract

The literature on external economies, diseconomies, and indivisibilities is related to past, present, and emerging land management problems. A definition of externalities and indivisibilities is provided and applied to problems of quality, common property resources, and outdoor recreation. Criteria for the evaluation of land management institutions are suggested and discussed. Current and past research efforts are examined in light of the perspective provided by the article. It is suggested that both the tools of neoclassical economics and the relevance of institutional economics might be combined profitably in the study of land economics problems. It was concluded that historical research efforts have tended to be polarized: the production economics-oriented group has been heavily oriented toward the internal aspects of individual firm theory; traditional land economists, while working on relevant problems, have not always made the best of existing theory in the evaluation of land management institutions.