According to answer to this question by KennyLJ., there exists the following definition of externality:
The simple, standard, and broad definition I favor is this:
A decision's effects are called external if they fall on someone other than the decision-maker(s). A positive (negative) external effect is called an external benefit (cost).
Moreover, author of the answer states that given the above definition the following would hold:
"This has the consequence that the" .... "the use/consumption of natural resources is considered an externality."
I have the following questions (I know guidelines recommend sticking to single question but they are all closely related):
Is there any mainstream academic (meaning peer reviewed) textbook, book or article that uses the 'standard' definition provided by KennyLJ and which would present a model (or at least an example) in which consumption of any resource is considered an externality in itself?
Is there any academic textbook, book or article that show any of the above two outside mainstream?
In order to first try to find answer myself I look over the following resources which provide the following definitions of externality:
a) Mankiw and Taylor (2014) Economics 3rd ed, pp239:
"the cost or benefit of one person's decision on the well-being of a bystander (a third party) which the decision maker does not take into account in making the decision." ... "as a result price mechanism does not reflect the true cost of the and benefit of decision.
b) Mankiw (2018) Principles of economics. 8ed.
"An externality arises when a person engages in an activity that influences the well-being of a bystander but neither pays nor receives compensation for that effect. If the impact on the bystander is adverse, it is called a negative externality. If it is beneficial, it is called a positive externality. In the presence of externalities, society’s interest in a market outcome extends beyond the well-being of buyers and sellers who participate in the market to include the well-being of bystanders who are affected indirectly"
c) Mas-Colell Whinston Green (1995) Microeconomic theory pp 352:
"Definition "11.B.1 An externality is present whenever the well-being of a consumer or the production possibilities of a firm are directly affected by the actions of another agent in the economy." .... "When we say 'directly,' we mean to exclude any effects that are mediated by prices."
d) Cowen & Tabarok Modern Principles of Economics 3rd ed (Glossary G-2):
Externalities: external costs or external benefits.
External cost: a cost borne by people other than the consumers or the producers trading in the market. External benefit: a benefit recieved by the people other than the consumers or producer trading in the market.
e) Mueller Public Choice III pp25
An externality occurs when the consumption or production of activity of one individual or firm has an unintended impact on the utility or production function of another individual or firm. ... These activities may be contrasted with normal market transaction in which A's action, say buying the tree, has an impact on B, the seller of the tree, but the impact is fully accounted through the operation of the price system."
f) Varian Microeconomic Analysis 3rd edition pp432:
When the actions of one agent directly affect the enviroment of another agent, we will sa that there is an externality. ... the first theorem of welfare economics does not hold in the presence of externalities. The reason is that there are things that people care about that are not priced.
A common theme seems to be that an externality is an effect that happens to the participants outside the market where actually the externality begins. Also all of the sources above claim that there are markets with no externalities implying that they all agree simple trading in the market itself and supply demand interactions in the market do not create externalities. Hence my last question is as follows:
- Is there any mainstream academic textbook, book or article post 1990 where this common theme would not be present?