🗊Презентация Chapter 10. Externalities

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Chapter 10. Externalities, слайд №1Chapter 10. Externalities, слайд №2Chapter 10. Externalities, слайд №3Chapter 10. Externalities, слайд №4Chapter 10. Externalities, слайд №5Chapter 10. Externalities, слайд №6Chapter 10. Externalities, слайд №7Chapter 10. Externalities, слайд №8Chapter 10. Externalities, слайд №9Chapter 10. Externalities, слайд №10Chapter 10. Externalities, слайд №11Chapter 10. Externalities, слайд №12Chapter 10. Externalities, слайд №13Chapter 10. Externalities, слайд №14Chapter 10. Externalities, слайд №15Chapter 10. Externalities, слайд №16Chapter 10. Externalities, слайд №17Chapter 10. Externalities, слайд №18Chapter 10. Externalities, слайд №19Chapter 10. Externalities, слайд №20Chapter 10. Externalities, слайд №21Chapter 10. Externalities, слайд №22Chapter 10. Externalities, слайд №23Chapter 10. Externalities, слайд №24Chapter 10. Externalities, слайд №25Chapter 10. Externalities, слайд №26

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Слайд 1





Externalities
10
Описание слайда:
Externalities 10

Слайд 2





Externalities
Externality
The uncompensated impact of one person’s actions on the well-being of a bystander
Market failure 
Negative externality
Impact on the bystander is adverse
Positive externality
Impact on the bystander is beneficial
Описание слайда:
Externalities Externality The uncompensated impact of one person’s actions on the well-being of a bystander Market failure Negative externality Impact on the bystander is adverse Positive externality Impact on the bystander is beneficial

Слайд 3





Externalities
Examples of negative externalities:
Exhaust from automobiles
Barking dogs
Examples of positive externalities:
Restored historic buildings
Research into new technologies
Decision maker - fails to account for externalities
Government: protect the interests of bystanders
Описание слайда:
Externalities Examples of negative externalities: Exhaust from automobiles Barking dogs Examples of positive externalities: Restored historic buildings Research into new technologies Decision maker - fails to account for externalities Government: protect the interests of bystanders

Слайд 4





Externalities and Market Inefficiency
Externalities 
Cause markets to allocate resources inefficiently
Welfare economics: a recap
Demand curve – value to consumers
Prices they are willing to pay
Supply curve – cost to suppliers
Equilibrium quantity and price
Efficient
Maximizes sum of producer & consumer surplus
Описание слайда:
Externalities and Market Inefficiency Externalities Cause markets to allocate resources inefficiently Welfare economics: a recap Demand curve – value to consumers Prices they are willing to pay Supply curve – cost to suppliers Equilibrium quantity and price Efficient Maximizes sum of producer & consumer surplus

Слайд 5





The market for aluminum
1
Описание слайда:
The market for aluminum 1

Слайд 6





Externalities and Market Inefficiency
Negative externalities
Pollution
Cost to society (of producing aluminum)
Larger than the cost to the aluminum producers
Social cost - supply
Private costs of the producers
Plus the costs to those bystanders affected adversely by the negative externality
Social cost curve – above the supply curve
Описание слайда:
Externalities and Market Inefficiency Negative externalities Pollution Cost to society (of producing aluminum) Larger than the cost to the aluminum producers Social cost - supply Private costs of the producers Plus the costs to those bystanders affected adversely by the negative externality Social cost curve – above the supply curve

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Pollution and the social optimum
2
Описание слайда:
Pollution and the social optimum 2

Слайд 8





Externalities and Market Inefficiency
Negative externalities
Optimum quantity produced
Maximize total welfare
Smaller than market equilibrium quantity
Government – correct market failure
Internalizing the externality
Altering incentives so that people take account of the external effects of their actions
E.g.: tax producers
Shift supply upward – by the size of the tax
Tax – value of negative externality
Описание слайда:
Externalities and Market Inefficiency Negative externalities Optimum quantity produced Maximize total welfare Smaller than market equilibrium quantity Government – correct market failure Internalizing the externality Altering incentives so that people take account of the external effects of their actions E.g.: tax producers Shift supply upward – by the size of the tax Tax – value of negative externality

Слайд 9





Externalities and Market Inefficiency
Positive externalities
Education
Benefit of education – private
Externalities: better government, lower crime rate, higher productivity and wages
Social value – demand
Higher than private value
Social value curve
Above demand curve
Описание слайда:
Externalities and Market Inefficiency Positive externalities Education Benefit of education – private Externalities: better government, lower crime rate, higher productivity and wages Social value – demand Higher than private value Social value curve Above demand curve

Слайд 10





Education and the social optimum
3
Описание слайда:
Education and the social optimum 3

Слайд 11





Externalities and Market Inefficiency
Positive externalities
Socially optimal quantity
Greater than market equilibrium quantity
Government – correct market failure
Internalize the externality
Subsidy
Описание слайда:
Externalities and Market Inefficiency Positive externalities Socially optimal quantity Greater than market equilibrium quantity Government – correct market failure Internalize the externality Subsidy

Слайд 12





Externalities and Market Inefficiency
Negative externalities
Markets - produce a larger quantity than is socially desirable
Positive externalities
Markets - produce a smaller quantity than is socially desirable
Government: internalize the externality
Taxing goods that have negative externalities
Subsidizing goods that have positive externalities
Описание слайда:
Externalities and Market Inefficiency Negative externalities Markets - produce a larger quantity than is socially desirable Positive externalities Markets - produce a smaller quantity than is socially desirable Government: internalize the externality Taxing goods that have negative externalities Subsidizing goods that have positive externalities

Слайд 13





Technology spillovers, industrial policy, and patent protection
Technology spillover = Positive externality
Impact of one firm’s research and production efforts on other firms’ access to technological advance
Government: internalize the externality
Subsidy = value of the technology spillover
Industrial policy
Government intervention in the economy that aims to promote technology-enhancing industries
Patent law
Protect the rights of inventors by giving them exclusive use of their inventions for a period of time
Описание слайда:
Technology spillovers, industrial policy, and patent protection Technology spillover = Positive externality Impact of one firm’s research and production efforts on other firms’ access to technological advance Government: internalize the externality Subsidy = value of the technology spillover Industrial policy Government intervention in the economy that aims to promote technology-enhancing industries Patent law Protect the rights of inventors by giving them exclusive use of their inventions for a period of time

Слайд 14





Public Policies Toward Externalities
Command-and-control policies: regulation 
Regulate behavior directly
Making certain behaviors either required or forbidden
Cannot eradicate pollution
Environmental Protection Agency (EPA)
Develop and enforce regulations
Protecting the environment
Dictates maximum level of pollution 
Requires that firms adopt a particular technology to reduce emissions
Описание слайда:
Public Policies Toward Externalities Command-and-control policies: regulation Regulate behavior directly Making certain behaviors either required or forbidden Cannot eradicate pollution Environmental Protection Agency (EPA) Develop and enforce regulations Protecting the environment Dictates maximum level of pollution Requires that firms adopt a particular technology to reduce emissions

Слайд 15





Public Policies Toward Externalities
Market-based policies
Provide incentives
Private decision makers - choose to solve the problem on their own
1. Corrective taxes and subsidies
Corrective tax
Induce private decision makers to take account of the social costs that arise from a negative externality
Places a price on the right to pollute
Reduce pollution at a lower cost to society
Описание слайда:
Public Policies Toward Externalities Market-based policies Provide incentives Private decision makers - choose to solve the problem on their own 1. Corrective taxes and subsidies Corrective tax Induce private decision makers to take account of the social costs that arise from a negative externality Places a price on the right to pollute Reduce pollution at a lower cost to society

Слайд 16





Why is gasoline taxed so heavily?
The gas tax = corrective tax
Three negative externalities 
Congestion
Accidents
Pollution
Doesn’t cause deadweight losses
Makes the economy work better
Less traffic congestion, safer roads, and cleaner environment
Описание слайда:
Why is gasoline taxed so heavily? The gas tax = corrective tax Three negative externalities Congestion Accidents Pollution Doesn’t cause deadweight losses Makes the economy work better Less traffic congestion, safer roads, and cleaner environment

Слайд 17





Why is gasoline taxed so heavily?
How high should the tax on gasoline be?
Most European countries
Gasoline taxes - much higher than those in the U.S.
2007 study, Journal of Economic Literature
Optimal corrective tax on gasoline was $2.10 per gallon
Actual tax in the United States: 40 cents
Tax revenue from a gasoline tax
Lower taxes that distort incentives and cause deadweight losses
Some government regulations
Production of fuel-efficient cars – unnecessary
Описание слайда:
Why is gasoline taxed so heavily? How high should the tax on gasoline be? Most European countries Gasoline taxes - much higher than those in the U.S. 2007 study, Journal of Economic Literature Optimal corrective tax on gasoline was $2.10 per gallon Actual tax in the United States: 40 cents Tax revenue from a gasoline tax Lower taxes that distort incentives and cause deadweight losses Some government regulations Production of fuel-efficient cars – unnecessary

Слайд 18





Public Policies Toward Externalities
Market-based policies
2. Tradable pollution permits
Voluntary transfer of the right to pollute from one firm to another
New scarce resource: pollution permits
Market to trade permits
Firm’s willingness to pay
Depend on its cost of reducing pollution
Описание слайда:
Public Policies Toward Externalities Market-based policies 2. Tradable pollution permits Voluntary transfer of the right to pollute from one firm to another New scarce resource: pollution permits Market to trade permits Firm’s willingness to pay Depend on its cost of reducing pollution

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Public Policies Toward Externalities
2. Tradable pollution permits
Advantage of free market for pollution permits
Initial allocation of pollution permits
Doesn't matter
Firms - reduce pollution at a low cost
Sell whatever permits they get
Firms - reduce pollution only at a high cost
Buy whatever permits they need
Efficient final allocation
Описание слайда:
Public Policies Toward Externalities 2. Tradable pollution permits Advantage of free market for pollution permits Initial allocation of pollution permits Doesn't matter Firms - reduce pollution at a low cost Sell whatever permits they get Firms - reduce pollution only at a high cost Buy whatever permits they need Efficient final allocation

Слайд 20





Public Policies Toward Externalities
Reducing pollution using pollution permits or corrective taxes
Firms pay for their pollution
Corrective taxes - to the government
Pollution permits, - buy permits
Internalize the externality of pollution
Описание слайда:
Public Policies Toward Externalities Reducing pollution using pollution permits or corrective taxes Firms pay for their pollution Corrective taxes - to the government Pollution permits, - buy permits Internalize the externality of pollution

Слайд 21





The equivalence of corrective taxes & pollution permits
4
Описание слайда:
The equivalence of corrective taxes & pollution permits 4

Слайд 22





Public Policies Toward Externalities
Objections to the economic analysis of pollution
“We cannot give anyone the option of polluting for a fee.”  - former Senator Edmund Muskie
People face trade-offs
Eliminating all pollution is impossible 
Clean water and clean air – opportunity cost
Lower standard of living
Описание слайда:
Public Policies Toward Externalities Objections to the economic analysis of pollution “We cannot give anyone the option of polluting for a fee.” - former Senator Edmund Muskie People face trade-offs Eliminating all pollution is impossible Clean water and clean air – opportunity cost Lower standard of living

Слайд 23





Public Policies Toward Externalities
Clean environment - is a normal good
Positive income elasticity
Rich countries can afford a cleaner environment 
More rigorous environmental protection
Clean air and clean water - law of demand
The lower the price of environmental protection
The more the public will want
Economic approach
Pollution permits and corrective taxes 
Reduces the cost of environmental protection
Increase demand for a clean environment
Описание слайда:
Public Policies Toward Externalities Clean environment - is a normal good Positive income elasticity Rich countries can afford a cleaner environment More rigorous environmental protection Clean air and clean water - law of demand The lower the price of environmental protection The more the public will want Economic approach Pollution permits and corrective taxes Reduces the cost of environmental protection Increase demand for a clean environment

Слайд 24





Private Solutions to Externalities
The types of private solutions
Moral codes and social sanctions
Charities
Self-interest of the relevant parties
Integrating different types of businesses
Interested parties – enter a contract
Описание слайда:
Private Solutions to Externalities The types of private solutions Moral codes and social sanctions Charities Self-interest of the relevant parties Integrating different types of businesses Interested parties – enter a contract

Слайд 25





Private Solutions to Externalities
The Coase theorem
If private parties can bargain without cost over the allocation of resources
They can solve the problem of externalities on their own
Private economic actors
Can solve the problem of externalities among themselves
Whatever the initial distribution of rights
Interested parties  - reach a bargain:
Everyone is better off & Outcome is efficient
Описание слайда:
Private Solutions to Externalities The Coase theorem If private parties can bargain without cost over the allocation of resources They can solve the problem of externalities on their own Private economic actors Can solve the problem of externalities among themselves Whatever the initial distribution of rights Interested parties - reach a bargain: Everyone is better off & Outcome is efficient

Слайд 26





Private Solutions to Externalities
Why private solutions do not always work
High transaction costs
Costs that parties incur in the process of agreeing to and following through on a bargain
Bargaining simply breaks down
Large number of interested parties
Описание слайда:
Private Solutions to Externalities Why private solutions do not always work High transaction costs Costs that parties incur in the process of agreeing to and following through on a bargain Bargaining simply breaks down Large number of interested parties



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