Externalities

As for external factors one of the external factors would be perhaps a new law that is given and affects directly or indirectly the business and that business needs to make some changes.

Externality can be either positive or negative. If one is building a plant to extract oil from the ground, the positive externality is the added jobs for the community. However, the potential pollution from the plant could be conceived as negative. The externality affect is when one does not control the impact from another person or companies decision. Another positive externality is the improvement of a workforce in an organization that employs local labor. Pollution is widely viewed as the top negative externality.

Throughout this section of Wheelan’s Naked Economics, the idea of externalities is introduced in a clear and straight forward approach. Externalities are the social cost, or the opportunity cost for everyone else, of an action. Wheelan, as usual, illustrates a variety of examples of externalities our society has to face as well as the government’s role in the bigger picture. Externalities provide a lot of vital information to help our understanding of the inner workings of our market government.

There are many positive and negative externalities in this situation because both the New Sense Inc. and the fishermen make many economic decisions. For example, if the property rights are assigned to the fishermen; the fishermen would have to use some of their profit to clean-up the lake and they might over-fish. This decision will have a negative effect to the New Sense Inc. because the New Sense Inc. might go out of business and the people who work for them will lose their jobs. In addition, if the property rights are assigned to the fishermen; they can force the New Sense Inc. to assume all the clean-up costs. This decision will give positive externalities because the lake would look cleaner, and the fishermen will make larger

However, taxes alone will not be able to solve the issue by itself, a multi-pronged approach is necessary. Taxes are one piece of the puzzle; quality and quantity standards combined with the taxes will force the business to make tough decisions and force them to innovate and consider clean technology options. Cap and trade systems may also be used with taxes, allowing business to emit a certain amount and make market decisions to purchase and emit more; and taxing them on certain levels. 1

An externality is side effect of an action that affects the well-being of a third party. Storm shelters are an externality because not only are the owners safe but neighbors, animals, and others can also enjoy the benefits of a storm shelter. Storm shelters are a positive externality because the third party (the neighbors) gain a benefit from the shelters. The party causing the spillover from the shelter is the owners. They are allowing others to come inside and receive the benefit the shelter gives by being safe from the storm. I believe that the owners are behaving ethically by allowing the spillover because it would be wrong and unjust to deny another human shelter to help them survive an event like a tornado.

As we see in the articles the most common external being competitive situation, this has a huge impact on businesses if the competiors has a better product this could make the consumer choose that product, resulting in decline in sales. This being in

Tullock specifies a type of externality: in agreements that require collective action, certain individuals resisting the majority decision can hinder the rest of the party’s ability to acquire the benefits of the action. They are thus causing an externality because they are injuring the majority’s ability to accomplish a goal. Tullock goes on to explain that the “reason government exists is that on occasion (frequently) the agreement is incomplete,” and government must compel “everyone to take the required action” (Tullock 30). For example, in a taking motivated by what O’Connor calls “blight,” property owners that refuse to allow their property to be rebuilt are blocking redevelopment that requires unanimous action in order to achieve the

The charge is levied as a way of internalizing the negative externalities industries cause to society, that being the pollution of the environment. Hence, a carbon price shifts the burden for the damage back to those who are responsible for it, and those who can reduce it. Instead of arguing who should reduce emissions, where it should be reduced and how it should be reduced, a carbon price gives economic actors the incentives to reduce the damages they cause by rewarding those who promote clean energy and punishing those who continue to cause

(C) Externalities -- Companies produce some type of external cost that affects the community. The company would not voluntarily reduce or

Pollution has become a heated issue in recent years. The destruction of the environment along with serious health problems are the eventual effects. The extensive use and availability of automobiles, tremendous amounts of production in the booming economy and the constant increase in demand for energy, can be held responsible.

An externality is the gap between private cost and social cost of some behavior; individual or firms engaging in private behavior that has broader social consequences. The government is an important part of our society. Government has a crucial role of dealing with externalities. Taxing is a method they use to regulate externalities and promote good incentives. The government sets rules, defines and protects property rights. The federal government issues thousands of regulations every year on everything from groundwater contamination to poultry inspection.. In California, the local government have zoning laws that forbid private property owners from impinging on neighbors by constructing building that are unsafe or even ugly. Law also requires

The traditional analysis obscure the nature choices to be made, avoid the harm to one party would conflict harm to another. The traditional analysis tends to miss out the key features of externality that is reciprocal nature. The reciprocal nature indicates that the externality is not simply result of one party’s action, but rather result of both parties’ combine actions. Similarly, either party can prevent the damage. For instance, Cattle damages crops of adjacent farmer, so cattle raiser can fence property or farmer leaves the land uncultivated. Economic optimal is maximize the joint value of outputs of both parties by

Externalized costs are cost of production that somebody else pays for. This means that big companies are not paying their workers much and sometimes even skipping on worker’s health insurance.

Negative externalities occur when production and or consumption of a good causes a harmful third party