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- Title
The Economic Theory of Clubs: Pareto Optimality Conditions.
- Authors
Yew-Kwang Ng
- Abstract
This article provides an alternative analysis of the economic theory of clubs presented by J. M. Buchanan. This article begins by describing the salient feature of Buchanan's analysis, that is the explicit specification of the numbers of individuals consuming collective goods. This feature is the most important innovation of Buchanan's analysis. It is followed by discussing how Buchanan derived his Pareto-optimality conditions. The next part of the paper will present the alternative to Buchanan's analysis. This analysis shows that once the conventional equality for private goods and conditions are satisfied, a Pareto optimum has been achieved, assuming that the second-order conditions are also satisfied. These conditions, however, do not imply Buchanan's condition. Then, the paper will turn to the geometry of both analysis. Here it will be shown that Buchanan's analysis generated a intersecting total benefit and total cost curves while the analysis proposed here elicited parallel total benefit and total cost curves. Finally, the paper considers a complication to both analysis--the number of clubs. It is noted that the both analysis assume implicitly that the number of clubs for each collective good is unity, or, at least, they do not include an explicit analysis of the number of clubs itself. To show the implication of this matter, an example is illustrated.
- Subjects
CLUBS; CONSUMPTION (Economics); PARETO optimum; ECONOMICS; BUCHANAN, James M., 1919-2013
- Publication
Economica, 1973, Vol 40, Issue 159, p291
- ISSN
0013-0427
- Publication type
Article
- DOI
10.2307/2552799