Notes on market failure and the Paretian (Kaldor-Hicks) relevance and irrelevance of unfavourable externalities

The following are notes that have been distributed by me over the last few years to students in Environmental Economics at The University of Queensland. They give particular attention to whether externalities are Pareto or Kaldor-Hicks relevant from a policy point of view. Externalities are Kaldor-Hicks or Pareto irrelevant if no change is possible for which gainers could compensate losers. Both absolute and marginal externalities may be Kaldor-Hicks relevant. Infra-marginal negative externalities are often, but not always, Kaldor-Hicks irrelevant. There are at least two cases where such externalities can be relevant. First, the absolute impact of the negative externality may be so great that the source of the externality should be eliminated. Secondly, if the externality arises from production, its nature may depend on the type of production technique adopted. Although for the technique adopted, an infra-marginal negative externality occurs. That is Paretian irrelevant given that choice of this technique is the only available possibility, alternative techniques may actually be available in practice. Some of these may generate even smaller total external effects and be socially preferable. Both cases are outlined and illustrated in these notes. The analysis reveals the dangers of relying on marginalism for deciding on environmental policy. Total (external) effects are often of great social and economic importance and appropriate social choices cannot be made on the basis of marginalism alone.

Testing for Market Power in Multiple-Input, Multiple-Output Industries: The Australian Grains and Oilseeds Industries

Recent empirical studies have found significant evidence of departures from competition in the input side of the Australian bread, breakfast cereal and margarine end-product markets. For example, Griffith (2000) found that firms in some parts of the processing and marketing sector exerted market power when purchasing grains and oilseeds from farmers. As noted at the time, this result accorded well with the views of previous regulatory authorities (p.358). In the mid-1990s, the Prices Surveillence Authority (PSA 1994) determined that the markets for products contained in the Breakfast Cereals and Cooking Oils and Fats indexes were "not effectively competitive" (p.14). The PSA consequently maintained price surveillence on the major firms in this product group. The Griffith result is also consistent with the large number of legal judgements against firms in this sector over the past decade for price fixing or other types of non-competitive behaviour. For example, bread manufacturer George Weston was fined twice during 2000 for non-competitive conduct and the ACCC has also recently pursued and won cases against retailer Safeway in grains and oilseeds product lines.

Economic incentives for global conservation of wildlife: New international policy directions

Growing economic globalisation by extending the operation of markets is a two-edged sword as far as nature conservation is concerned. In some circumstances, it threatens the conservation of nature and in other cases, it provides economic incentives that foster the conservation of biodiversity. This article shows how global policy directions have altered in that regard. Initially the World Conservation Union (IUCN) favoured bans on trade in endangered species. This view was enshrined in the Convention on International Trade in Endangered Species (CITES). Subsequently, with the upsurge of support for market-based economic liberalism, IUCN recognised that economic and market incentives, if linked to appropriate property rights, could foster biodiversity conservation. This is reflected in the International Convention on Biological Diversity. While there is conflict between this convention and CITES, its extent has been exaggerated. As explained, in certain cases, trade restrictions of the type adopted in CITES are appropriate for nature conservation whereas the market-oriented policy of the Convention on Biological Diversity can be effective in some different situations. Whether or not the extension of markets in wildlife and wildlife products and growing economic globalisation favours nature conservation varies according to the circumstances.

International market selection: Developing a model from Australian case studies

This paper develops a theory that firms seek out new country markets on the basis of expected commercial returns. These expectations depend on judgements about the attractiveness of the market and the firm's competitive position in it, which in turn are influenced by informants. It is the number and strengths of these informants that will underlie the probability of a country being identified and assessed as a new market by any firm.

Overexpression of a Slit homologue impairs convergent extension of the mesoderm and causes cyclopia in embryonic zebrafish

Slit is expressed in the midline of the central nervous system both in vertebrates and invertebrates. In Drosophila, it is the midline repellent acting as a ligand for the Roundabout (Robo) protein, the repulsive receptor which is expressed on the growth cones of the commissural neurons. We have isolated cDNA fragments of the zebrafish slit2 and slit3 homologues and found that both genes start to be expressed by the midgastrula stage well before the axonogenesis begins in the nervous system, both in the axial mesoderm, and slit2 in the anterior margin of the neural plate and slit3 in the polster at the anterior end of the prechordal mesoderm. Later, expression of slit2 mRNA is detected mainly in midline structures such as the floor plate cells and the hypochord, and in the anterior margins of the neural plates in the zebrafish embryo, while slit3 expression is observed in the anterior margin of the prechordal plate, the floorplate cells in the hindbrain, and the motor neurons both in the hindbrain and the spinal cord. To study the role of Slit in early embryos, we overexpressed Slit2 in the whole embryos either by injection of its mRNA into one-cell stage embryos or by heat-shock treatment of the transgenic embryos which carries the slit2 gene under control of the heat-shock promoter. Overexpression of Slit2 in such ways impaired the convergent extension movement of the mesoderm and the rostral migration of the cells in the dorsal diencephalon and resulted in cyclopia. Our results shed light on a novel aspect of Slit function as a regulatory factor of mesodermal cell movement during gastrulation. (C) 2001 Academic Press.