曼昆《經(jīng)濟(jì)學(xué)原理》英文版完整講義叢externalities

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THEECONOMICSOFTHEPUBLICSECTOR10ExternalitiesRecall:AdamSmith’s“invisiblehand”ofthemarketplaceleadsself-interestedbuyersandsellersinamarkettomaximizethetotalbenefitthatsocietycanderivefromamarket.Butmarketfailurescanstillhappen.EXTERNALITIESANDMARKETINEFFICIENCYAnexternalityreferstotheuncompensatedimpactofoneperson’sactionsonthewell-beingofabystander.Externalitiescausemarketstobeinefficient,andthusfailtomaximizetotalsurplus.EXTERNALITIESANDMARKETINEFFICIENCYAnexternalityarises......whenapersonengagesinanactivitythatinfluencesthewell-beingofabystanderandyetneitherpaysnorreceivesanycompensationforthateffect.EXTERNALITIESANDMARKETINEFFICIENCYWhentheimpactonthebystanderisadverse,theexternalityiscalledanegativeexternality.Whentheimpactonthebystanderisbeneficial,theexternalityiscalledapositiveexternality.EXTERNALITIESANDMARKETINEFFICIENCYNegativeExternalitiesAutomobileexhaustCigarettesmokingBarkingdogs(loudpets)LoudstereosinanapartmentbuildingEXTERNALITIESANDMARKETINEFFICIENCYPositiveExternalitiesImmunizationsRestoredhistoricbuildingsResearchintonewtechnologiesFigure1TheMarketforAluminumCopyright?2004South-WesternQuantityofAluminum0PriceofAluminumEquilibriumDemand(privatevalue)Supply(privatecost)QMARKETEXTERNALITIESANDMARKETINEFFICIENCYNegativeexternalitiesleadmarketstoproducealargerquantitythanissociallydesirable.Positiveexternalitiesleadmarketstoproducealargerquantitythanissociallydesirable.WelfareEconomics:ARecapTheMarketforAluminumThequantityproducedandconsumedinthemarketequilibriumisefficientinthesensethatitmaximizesthesumofproducerandconsumersurplus.Ifthealuminumfactoriesemitpollution(anegativeexternality),thenthecosttosocietyofproducingaluminumislargerthanthecosttoaluminumproducers.WelfareEconomics:ARecapTheMarketforAluminumForeachunitofaluminumproduced,thesocialcostincludestheprivatecostsoftheproducersplusthecosttothosebystandersadverselyaffectedbythepollution.Figure2PollutionandtheSocialOptimumCopyright?2004South-WesternEquilibriumQuantityofAluminum0PriceofAluminumDemand(privatevalue)Supply(privatecost)SocialcostQOPTIMUMOptimumCostofpollutionQMARKETNegativeExternalitiesTheintersectionofthedemandcurveandthesocial-costcurvedeterminestheoptimaloutputlevel.Thesociallyoptimaloutputlevelislessthanthemarketequilibriumquantity.NegativeExternalitiesInternalizinganexternalityinvolvesalteringincentivessothatpeopletakeaccountoftheexternaleffectsoftheiractions.NegativeExternalitiesAchievingtheSociallyOptimalOutputThegovernmentcaninternalizeanexternalitybyimposingataxontheproducertoreducetheequilibriumquantitytothesociallydesirablequantity.PositiveExternalitiesWhenanexternalitybenefitsthebystanders,apositiveexternalityexists.Thesocialvalueofthegoodexceedstheprivatevalue.PositiveExternalitiesAtechnologyspilloverisatypeofpositiveexternalitythatexistswhenafirm’sinnovationordesignnotonlybenefitsthefirm,butenterssociety’spooloftechnologicalknowledgeandbenefitssocietyasawhole.Figure3EducationandtheSocialOptimumCopyright?2004South-WesternQuantityofEducation0PriceofEducationDemand(privatevalue)SocialvalueSupply(privatecost)QMARKETQOPTIMUMPositiveExternalitiesTheintersectionofthesupplycurveandthesocial-valuecurvedeterminestheoptimaloutputlevel.Theoptimaloutputlevelismorethantheequilibriumquantity.Themarketproducesa

smallerquantitythanissociallydesirable.Thesocialvalueofthegoodexceedstheprivatevalueofthegood.PositiveExternalitiesInternalizingExternalities:SubsidiesUsedastheprimarymethodforattemptingtointernalizepositiveexternalities.IndustrialPolicyGovernmentinterventionintheeconomythataimstopromotetechnology-enhancingindustriesPatentlawsareaformoftechnologypolicythatgivetheindividual(orfirm)withpatentprotectionapropertyrightoveritsinvention.Thepatentisthensaidtointernalizetheexternality.PRIVATESOLUTIONSTOEXTERNALITIESGovernmentactionisnotalwaysneededtosolvetheproblemofexternalities.PRIVATESOLUTIONSTOEXTERNALITIESMoralcodesandsocialsanctionsCharitableorganizationsIntegratingdifferenttypesofbusinessesContractingbetweenpartiesTheCoaseTheoremTheCoaseTheoremisapropositionthatifprivatepartiescanbargainwithoutcostovertheallocationofresources,theycansolvetheproblemofexternalitiesontheirown.TransactionsCostsTransactioncostsarethecoststhatpartiesincurintheprocessofagreeingtoandfollowingthroughonabargain.WhyPrivateSolutionsDoNotAlwaysWorkSometimestheprivatesolutionapproachfailsbecausetransactioncostscanbesohighthatprivateagreementisnotpossible.PUBLICPOLICYTOWARDEXTERNALITIESWhenexternalitiesaresignificantandprivatesolutionsarenotfound,mand-and-controlpolicies.market-basedpolicies.PUBLICPOLICYTOWARDEXTERNALITIESCommand-and-ControlPoliciesUsuallytaketheformofregulations:Forbidcertainbehaviors.Requirecertainbehaviors.Examples:Requirementsthatallstudentsbeimmunized.StipulationsonpollutionemissionlevelssetbytheEnvironmentalProtectionAgency(EPA).PUBLICPOLICYTOWARDEXTERNALITIESMarket-BasedPoliciesGovernmentusestaxesandsubsidiestoalignprivateincentiveswithsocialefficiency.Pigoviantaxesaretaxesenactedtocorrecttheeffectsofanegativeexternality.PUBLICPOLICYTOWARDEXTERNALITIESExamplesofRegulationversusPigovianTaxIftheEPAdecidesitwantstoreducetheamountofpollutioncomingfromaspecificplant.TheEPAcould…tellthefirmtoreduceitspollutionbyaspecificamount(i.e.regulation).levyataxofagivenamountforeachunitofpollutionthefirmemits(i.e.Pigoviantax).PUBLICPOLICYTOWARDEXTERNALITIESMarket-BasedPoliciesTradablepollutionpermits

allowthe

voluntarytransferoftherighttopollutefromonefirmtoanother.Amarketforthesepermitswilleventuallydevelop.Afirmthatcanreducepollutionatalowcostmayprefertosellitspermittoafirmthatcanreducepollutiononlyatahighcost.Figure4TheEquivalenceofPigovianTaxesandPollutionPermitsCopyright?2004South-WesternQuantityofPollution0PriceofPollutionDemandforpollutionrightsPPigoviantax(a)PigovianTax2....which,togetherwiththedemandcurve,determinesthequantityofpollution.1.APigoviantaxsetsthepriceofpollution...QFigure4TheEquivalenceofPigovianTaxesandPollutionPermitsCopyright?2004South-WesternQuantityofPollution0DemandforpollutionrightsQSupplyofpollutionpermits(b)PollutionPermitsPriceofPollution2....which,togetherwiththedemandcurve,determinesthepriceofpollution.1.Pollutionpermitssetthequantityofpollution...PSummary