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.

Influence of irradiant energy on degree of conversion, polymerization rate and shrinkage stress in an experimental resin composite system

Objective. This study evaluated the degree of conversion (DC), maximum rate of cure (R(p)(max)), and polymerization stress (PS) developed by an experimental dental composite subjected to different irradiant energies (3,6,12, 24, or 48J/cm(2)) under constant irradiance (500 mw/cm(2)). Methods. DC and R(p)(max) were monitored for 10 min on the bottom surface of 2-mm thick disks and on 150-mu m thick films (representing the top of the specimen) using ATR-FTIR. PS was monitored for 10 min in 2-mm thick disks bonded to two glass rods (O = 5 mm) attached to a universal testing machine. One-way ANOVA/Tukey tests were used and differences in DC and R(p)(max) between top and bottom surfaces were examined using Student`s t-test. Statistical testing was performed at a pre-set alpha of 0.05. Results. For a given surface, DC showed differences among all groups, except at the top between 24 and 48 J/cm(2). R(p)(max) was similar among all groups at the same surface and statistically higher at the top surface. PS also showed significant differences among all groups. Data for 48 J/cm(2) were not obtained due to specimen failure at the glass/composite interface. Significance. Increases in irradiant exposure led to significant increases in DC and PS, but had no effect on R(p)(max) (c) 2008 Academy of Dental Materials. Published by Elsevier Ltd. All rights reserved.