Question

The topic of this discussion is on Externalities. Specifically answer this prompt: Have you ever experienced a negative or positive externality? Specifically identify the "consumers" and the "producers" in the market, and how you were affected by that market. Specifically explain what the positive or negative externality is, and if possible give a dollar value of that positive or negative externality.

In the response: please post possible corrections to the externalities posed by students. Use either government regulation or the Coase Theorem in your response and be specific on the type of regulation (e.g. taxes, subsidies, command & control).

One example is: open gravel truck beds on the freeway. On the freeway I often drive by large semi-trucks carrying gravel in open beds. Sometimes large pebbles or small rocks will fly out of the open bed and strike and dent my car or could crack my window. The market here is between the gravel producers (and transporters) and those who will purchase the gravel. These pebbles act as a negative externality in the market for gravel, specifically in the form of damage to my car and to other peoples' vehicles who do not participate at all in this gravel market.

1. A personal story about positive or negative externalities in a market.
2. Include a detailed and accurate application of one or more of the concepts: positive externality, negative externality, deadweight loss, property rights, coase theorem.

Answer 1

Answer - I will give the example of a negative externality. In the region where I live , there are large farms. In the harvesting season , when the grains have been sold in the market , the farmers burn the extracts of hay in the farm itself. This leads to very high amount of poisonous gas emmissions into the atmosphere. A lot of people suffer from breathing problems and there is the problem of smog.

To solve this problem , the government pursuades the farmers to not to burn the hay , but sell it to government at appropriate price so that government can treat it or dispose off without causing any further externality.

In this case , we are the consumer of this externality , and the farmers are the producers. The government incurs spending to solve the problem.