A Selected Review of the Literature

In this chapter we trace some of the historical treatment given by economists to pollution and congestion problems. From the time of Marshall, it has been customary to place pollution and congestion under the heading “external diseconomies,” a category which came to hold many of the counter-examples to the assumptions of pure competition. Although Pigou treated pollution and congestion problems seriously and at length, later writers increasingly relegated these problems to footnote status, until the recent explosion of interest. Now the pathologies of non-convexity and single member “markets,” the same inherent pathologies which induced earlier neglect, attract the attention of theorists; at the same time the growth in visibility and magnitude of pollution-congestion1 problems attracts practical economists.