Introduction

In the previous chapter we discussed several notions that could, under different circumstances, be regarded as equilibria of a social system. Such notions are designed to represent viable outcomes. One that came up for particular scrutiny was the notion of a competitive equilibrium of a private ownership economy. A central feature underlying this concept is the existence of a competitive market for each and every commodity in the economy. Interest in such an equilibrium stems largely from the fact that under certain circumstances it sustains an efficient allocation of resources, in a sense that was made precise in the previous chapter. This provides one with a reason for regarding such an equilibrium as a benchmark with which to compare viable outcomes in other circumstances. The precise sense in which this can be done will occupy a great deal of this book. Now, there are many circumstances in which market solutions do not sustain an efficient allocation of resources. Many such situations can be described by saying that certain essential markets do not exist. Sometimes they just happen not to exist for accidental or historical reasons; sometimes there are logical reasons why they cannot exist; sometimes the nature of the physical situation keeps them from existing, or makes them function wrongly if they do exist. It happens that industries producing (or using) renewable and non-renewable resources are especially vulnerable to these difficulties.