Pigou, Knight, diminishing returns, and optimal Pigouvian congestion tolls by John E. Mcdonald

By:

Mcdonald, John F [author]

Material type: Text

text

Media type:

unmediated

Carrier type:

volume

Subject(s):

Economics

LOC classification:

HB75 JOU

Online resources:

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Summary: Arthur Pigou introduced the iconic two-road model in the first edition of The Economics of Welfare (1920), and it has been thought that this model was intended to demonstrate the need for Pigouvian taxes to mitigate traffic congestion. However, Pigou’s intention was to show that efficient output for industries subject to decreasing returns required a tax on output. Pigou was incorrect, but the two-road model (correctly considered) became the starting point for the analysis of traffic congestion in the 1950s. This paper recounts the doctrinal history of decreasing returns industries and the two-road model.

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Holdings
Item type	Current library	Call number	Vol info	Copy number	Status	Notes	Date due	Barcode
Journal Article	Main Library - Special Collections	HB75 JOU (Browse shelf(Opens below))	Vol. 35, no. 3 (pages 353-372)	SP17520	Not for loan	For In House Use

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Arthur Pigou introduced the iconic two-road model in the first edition of The Economics of Welfare (1920), and it has been thought that this model was intended to demonstrate the need for Pigouvian taxes to mitigate traffic congestion. However, Pigou’s intention was to show that efficient output for industries subject to decreasing returns required a tax on output. Pigou was incorrect, but the two-road model (correctly considered) became the starting point for the analysis of traffic congestion in the 1950s. This paper recounts the doctrinal history of decreasing returns industries and the two-road model.

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