外部性、环境政策与公共品

chapter five

Externalities, Environmental Policy, and Public Goods

Economic Incentives Spur Duke Energy Corporation to Reduce PollutionCHAPTER 5: Externalities, Environmental Policy, and Public Goods After studying this chapter, you should be able to:1 Identify examples of positive and negative externalities and use graphs to show how externalities affect economic efficiency. Discuss the Coase theorem and explain how private bargaining can lead to economic efficiency in a market with an externality. Analyze government policies to achieve economic efficiency in a market with an externality. Explain how goods can be categorized on the basis of whether they are rival and excludable. Define a public good and a common resource, and use graphs to illustrate the efficient quantities of public goods and common resources.2 of 27

LEARNING OBJECTIVES

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Pollution is a part of economic life…

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1 LEARNING OBJECTIVE

Externalities and EfficiencyCHAPTER 5: Externalities, Environmental Policy, and Public Goods

Externality A benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service.

The Effect of ExternalitiesPrivate cost The cost borne by the producer of a good or service. Social cost The total cost of producing a good, including both the private cost and any external cost. Private benefit The benefit received by the consumer of a good or service. Social benefit The total benefit from consuming a good, including both the private benefit and any external benefit.

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Externalities and EfficiencyCHAPTER 5: Externalities, Environmental Policy, and Public GoodsHOW A NEGATIVE EXTERNALITY IN PRODUCTION REDUCES ECONOMIC EFFICIENCY

5-1The Effect of Pollution on Economic Efficiency

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Externalities and EfficiencyCHAPTER 5: Externalities, Environmental Policy, and Public GoodsHOW A POSITIVE EXTERNALITY IN CONSUMPTION REDUCES ECONOMIC EFFICIENCY

5-2The Effect of a Positive Externality on Efficiency

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Externalities and EfficiencyCHAPTER 5: Externalities, Environmental Policy, and Public Goods

Externalities Can Result in Market Failure Market failure Situations where the market fails to produce the efficient level of output. What Causes Externalities? Property rights The rights inpiduals or businesses have to the exclusive use of their property, including the right to buy or sell it.

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2 LEARNING OBJECTIVE

Private Solutions to Externalities: The Coase TheoremCHAPTER 5: Externalities, Environmental Policy, and Public Goods

The Economically Efficient Level of Pollution Reduction5-3The Marginal Benefit from Pollution Reduction Should Equal the Marginal Cost

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5-1CHAPTER 5: Externalities, Environmental Policy, and Public Goods The Reduction in Infant Mortality Due to the Clean Air Act

Reduction in air pollution has been linked to a decline in infant mortality.

Remember that It’s the Net Benefit that Counts8 of 27

Private Solution

s to Externalities: The Coase Theorem The Basis for Private Solutions to ExternalitiesCHAPTER 5: Externalities, Environmental Policy, and Public Goods5-4The Benefits of Reducing Pollution to the Optimal Level are Greater than the Costs

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5-2The Fable of the Bees CHAPTER 5: Externalities, Environmental Policy, and Public Goods

Some apple growers and beekeepers make private arrangements to arrive at an economically efficient outcome.

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Private Solutions to Externalities: The Coase TheoremCHAPTER 5: Externalities, Environmental Policy, and Public Goods

The Problem of Transactions Costs Transactions costs The costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services. The Coase Theorem Coase theorem The argument of economist Ronald Coase that if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities.11 of 27

3 LEARNING OBJECTIVE

Government Solutions to ExternalitiesCHAPTER 5: Externalities, Environmental Policy, and Public Goods

Government Solutions to Externalities

5-5When There is a Negative Externality, a Tax Can Bring About the Efficient Level of Output

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5-13 LEARNING OBJECTIVE

CHAPTER 5: Externalities, Environmental Policy, and Public Goods

Using a Tax to Deal with a Negative Externality

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Government Solutions to ExternalitiesCHAPTER 5: Externalities, Environmental Policy, and Public Goods

Government Solutions to Externalities5-6When There is a Positive Externality, a Subsidy Can Bring About the Efficient Level of Output

Pigovian taxes and subsidies Government taxes and subsidies intended to bring about an efficient level of output in the presence of externalities.

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Government Solutions to ExternalitiesCHAPTER 5: Externalities, Environmental Policy, and Public Goods

Command and Control versus Tradeable Emissions Allowances Command and control approach Government-imposed quantitative limits on the amount of pollution firms are allowed to generate, or government-required installation by firms of specific pollution control devices.

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Government Solutions to ExternalitiesCHAPTER 5: Externalities, Environmental Policy, and Public Goods

Command and Control versus Tradeable Emissions Allowances5-7Estimated Cost of the Acid Rain Program in 2010

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