externalities
Subject:
Economics [1]
Externalities-
When an economic transaction happens there are spillovers some bad and some good
Spillover Costs (pollution, crime, etc) Spillover Benefits some good ( better health, quicker transportation)
What should government do to externalities, when should they get involved
People controlled
Coase theorem- If there are no large bargaining costs, people will do what is best for both them and “community”.
Lawsuits – Nuisance suits are common but do they contain spillovers? Punitive damages sometimes do the trick, but companies will always weigh activity versus cost of big lawsuit, Big tobacco, McDonalds’ coffee etc…
Government action