Question

People who live on the edge of small lakes sometimes have break walls constructed on their property by the shore. A break wall is typically a vertical column of wood or concrete that prevents high water levels from covering part of the owner's property, reducing the size of the beach, and/or eroding the yard. However, several communities have restricted property owners from building break walls. Can you think of a reason for that?

Answer 1

You have to understand the concept of externalities here where, it is considered as a negative externality for the people in the properties near by and having a lake view and this is because the Lakeview is a premium and that is the reason why the properties can be priced very high and if they build break walls what happens is that there would be a social cost by the property, people who will lose the lakeview as a result of which they have to pay for it by selling them off at lower prices and that is the reason why it is a negative externality because the cost is borne by the third party due to one's action. therefore several communities have restricted property owners from building the break walls so that the negative externality can be eliminated