Re:Lambda School leaked documents show poor performance over...
by eru on Wednesday October 27, 2021 @01:01AM
(#29009717)
I know the jargon. (But explaining it doesn't hurt.)
The 'perfect competition' model is indeed not applicable here. But that's not a problem: we know empirically that markets work (and work better the freer they are). The theory just gives us the intellectual tools to investigate why that is so.
What you are describing is still not a proper externality. In the same sense that eg having a competitor is not described as an externality.
(Or similarly, given your logic, the existence of shops where people have to pay for stuff would be an externality, because now they have to make sure that they are not in a 'shop' where everything is free first. The example is admittedly a bit silly, but if you substitute 'hospital' for 'shop', it's somewhat applicable to the UK.)
The 'perfect competition' model is indeed not applicable here. But that's not a problem: we know empirically that markets work (and work better the freer they are). The theory just gives us the intellectual tools to investigate why that is so.
What you are describing is still not a proper externality. In the same sense that eg having a competitor is not described as an externality.
(Or similarly, given your logic, the existence of shops where people have to pay for stuff would be an externality, because now they have to make sure that they are not in a 'shop' where everything is free first. The example is admittedly a bit silly, but if you substitute 'hospital' for 'shop', it's somewhat applicable to the UK.)
About 'perfect competition' about real world competition: you might like to have a look at https://econfaculty.gmu.edu/bcaplan/compet