EDWARD S. MASON 173 



appear in the process of development, they have any particular affinity 

 for investment in the natural resource area; in fact, the reverse is 

 probably true. But there is reason to believe that static external econo- 

 mies and diseconomies are particularly important in the exploitation 

 of natural resources. Almost all the textbook examples of static inter- 

 dependencies are drawn from this area.^^ An expansion of apple or- 

 chards will increase the honey yields of the neighborhood's comple- 

 ment of bees.^^ A cutting of forests on the hillsides may lower the 

 water supply for farm crops in the valley. The exploitation of a river 

 flow for power purposes may neglect gains or losses from flood con- 

 trol, navigation, or other uses. Expansion of oil production from the 

 wells of one owner may increase the real costs and reduce the yields 

 of other owners of the pool. This list could be expanded indefinitely. 

 Here I am concerned only with a small part of this sizable field of 

 economic analysis relating to external economies. The thesis of this 

 section is, in brief, as follows: 



1. That external economies and diseconomies taking the form of 

 static interdependencies are pretty well limited to the natural resource 

 field; 



2. That these economies and diseconomies emerge largely because 

 of institutional factors associated with a free enterprise economy and 

 are unlikely to be overcome without government intervention; 



3. That, consequently, the examination of external economies and 

 diseconomies and of the means appropriate to the capture of the one 

 and the elimination of the other is a part of the political economy of 

 natural resource use. 



There seems to be reason for the concentration of examples of ex- 

 ternal economies and diseconomies in the natural resource area. These 

 external effects may persist because of lack of knowledge or foresight, 

 or because of institutional or technological obstacles to their capture 



18 Cf. James E. Meade, "External Economies and Diseconomies," Economic 

 Journal, March 1952; Tibor Scitovsky, "Two Concepts of External Economies," 

 Journal of Political Economy, April 1954; Svend Laursen, op. cit. As Scitovsky 

 puts it {op. cit., p. 145), "The examples of external economies given by Meade 

 are somewhat bucolic in nature, having to do with bees, orchards and woods. 

 This, however, is no accident; it is not easy to find examples from industry." 



1^ This is Meade's example, op. cit. 



