Hi,

The opening paragraph of "The Problem of Social Cost" by Ronald Coase (1960) names AC Pigou's discussion of the harmful effects smoke from a factory has on neighbouring properties.  Coase gives many examples of externalities as he exams the relationship between transactions costs and externalities.

Regards,
Mel Cross
________________________________
From: Societies for the History of Economics <[log in to unmask]> on behalf of Spencer Banzhaf <[log in to unmask]>
Sent: Wednesday, February 14, 2024 12:18 PM
To: [log in to unmask] <[log in to unmask]>
Subject: [SHOE] smoke & laundry as an externalities example

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All,
The forum has been a bit quiet lately so maybe I can mix things up with a trivia question.

A common example of externalities in textbooks and articles in the 1970s and '80s was the case of a factory whose smoke made it more costly for the laundromat to clean clothes (e.g. Baumol & Oates textbook 1975; J. Buchanan, Natural Resources J., 1973).  When I was a student, I used to think that this was a very whimsical example, but Pigou mentions it as early as Wealth and Welfare (1912), it was included in late 19th C. discussions of the smoke nuisance in the UK, and, as my colleague Randy Walsh and I have discussed in a recent paper, it was quantified by economists in Pittsburgh in 1913.

The trouble is, we are having a hard time tracing this example from 1912-13 to the 1970s textbooks.  Medema has suggested that, in general, there is a gap in the lit from Pigouvian external economies to 1970s environmental externalities.  We are interested in the very specific case of this laundry example.  Does anybody have any examples they could share of economists between 1912 and, say, 1973 using this example to illustrate externalities (loosely defined)?  Recognizing that the term "externality," is changing over time, when did this become codified as a "classic example"?

Thanks for your thoughts and speculations,
Spencer
PS -- for those who prefer to write offline, please include Randy Walsh, who is cc'd here (not registered w SHOE).
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H. Spencer Banzhaf
Professor, NC State University
Director, Center for Environmental & Resource Economic Policy