In Austria, economics has never had direct political aims in spite of the close connection of the Austrian marginal utility theory with utilitarian philosophy. The Austrians were preoccupied with value theory and never elaborated a detailed theory of welfare economics. (Myrdal, 1955)

The framework of catallactic efficiency suggests a mode of analysis for assessing the welfare implications of externalities that differs significantly from the standard approach. Most importantly, the impact that any external effects have on particular market outcomes, i.e., prices or output levels, cannot be a deciding factor in determining the effects of the externality on market efficiency.

The framework of analysis offered here represents a radical departure from both standard welfare economics and its application in the area of externalities. For reasons discussed at the outset, and reiterated throughout the text, the perfectly competitive general equilibrium (PCGE) has been completely jettisoned as a normative guide for economic analysis. Furthermore, the focus was not switched to some other end-state result.