《外部性与公共物品》PPT课件.ppt

,Chapter 18,Externalities and Public Goods,Chapter 1,Slide 2,Topics to be Discussed,ExternalitiesWays of Correcting Market FailureExternalities and Property RightsCommon Property Resources,Chapter 1,Slide 3,Topics to be Discussed,Public GoodsPrivate Preferences for Public Goods,Chapter 1,Slide 4,Externalities,NegativeAction by one party imposes a cost on another partyPositiveAction by one party benefits another party,Chapter 1,Slide 5,External Cost,ScenarioSteel plant dumping waste in a riverThe entire steel market effluent can be reduced by lowering output(fixed proportions production function),Chapter 1,Slide 6,External Cost,ScenarioMarginal External Cost(MEC)is the cost imposed on fishermen downstream for each level of production.Marginal Social Cost(MSC)is MC plus MEC.,External Costs,Firm output,Price,Industry output,Price,Chapter 1,Slide 8,External Cost,Negative Externalities encourage inefficient firms to remain in the industry and create excessive production in the long run.,Chapter 1,Slide 9,Externalities,Positive Externalities and InefficiencyExternalities can also result in too little production,as can be shown in an example of home repair and landscaping.,Chapter 1,Slide 10,External Benefits,Repair Level,Value,Is research and development discouraged by positiveexternalities?,Chapter 1,Slide 11,Ways of Correcting Market Failure,Assumption:The market failure is pollutionFixed-proportion production technologyMust reduce output to reduce emissionsUse an output tax to reduce outputInput substitution possible by altering technology,Chapter 1,Slide 12,The Efficient Level of Emissions,Level of Emissions,2,4,6,Dollarsper unitof Emissions,0,2,4,6,8,10,12,14,16,18,20,22,24,26,Assume:1)Competitive market2)Output and emissions decisions are independent3)Profit maximizing output chosen,Why is this more efficientthan zero emissions?,Chapter 1,Slide 13,Ways of Correcting Market Failure,Options for Reducing Emissions to E*Emission StandardSet a legal limit on emissions at E*(12)Enforced by monetary and criminal penaltiesIncreases the cost of production and the threshold price to enter the industry,Chapter 1,Slide 14,Standards and Fees,Level of Emissions,Dollarsper unitof Emissions,Chapter 1,Slide 15,Options for Reducing Emissions to E*Emissions FeeCharge levied on each unit of emission,Ways of Correcting Market Failure,Chapter 1,Slide 16,Standards and Fees,Level of Emissions,Dollarsper unitof Emissions,Chapter 1,Slide 17,Standards Versus FeesAssumptionsPolicymakers have asymmetric informationAdministrative costs require the same fee or standard for all firms,Ways of Correcting Market Failure,Chapter 1,Slide 18,The Case for Fees,Level of Emissions,2,4,6,Fee perUnit ofEmissions,0,1,2,3,4,5,6,7,8,9,10,11,12,13,1,3,5,14,The cost minimizing solutionwould be an abatement of 6for firm 1 and 8 for firm 2 andMCA1=MCA2=$3.,Chapter 1,Slide 19,Advantages of FeesWhen equal standards must be used,fees achieve the same emission abatement at lower cost.Fees create an incentive to install equipment that would reduce emissions further.,Ways of Correcting Market Failure,Chapter 1,Slide 20,The Case for Standards,Level of Emissions,Fee perUnit ofEmissions,0,2,4,6,8,10,12,14,16,2,4,6,8,10,12,14,16,Chapter 1,Slide 21,Summary:Fees vs.StandardsStandards are preferred when MSC is steep and MCA is flat.Standards(incomplete information)yield more certainty on emission levels and less certainty on the cost of abatement.,Ways of Correcting Market Failure,Chapter 1,Slide 22,Summary:Fees vs.StandardsFees have certainty on cost and uncertainty on emissions.Preferred policy depends on the nature of uncertainty and the slopes of the cost curves.,Ways of Correcting Market Failure,Chapter 1,Slide 23,Transferable Emissions PermitsPermits help develop a competitive market for externalities.Agency determines the level of emissions and number of permitsPermits are marketableHigh cost firm will purchase permits from low cost firms,Ways of Correcting Market Failure,Chapter 1,Slide 24,QuestionWhat factors could limit the efficiency of this approach?,Ways of Correcting Market Failure,Chapter 1,Slide 25,The Costs and Benefitsof Reduced Sulfur Dioxide Emissions,Cost of Reducing EmissionsConversion to natural gas from coal and oilEmission control equipment,Chapter 1,Slide 26,Benefits of Reducing EmissionsHealthReduction in corrosionAesthetic,The Costs and Benefitsof Reduced Sulfur Dioxide Emissions,Chapter 1,Slide 27,Sulfur Dioxide Emissions Reductions,Sulfur dioxide concentration(ppm),20,40,60,0,Dollarsperunit ofreduction,0.02,0.04,0.06,0.08,ObservationsMAC=MSC.0275.0275 is slightly below actual emission levelEconomic efficiency improved,Chapter 1,Slide 28,Emissions Trading and Clean Air,BubblesFirm can adjust pollution controls for individual sources of pollutants as long as a total pollutant limit is not exceeded.OffsetsNew emissions must be offset by reducing existing emissions 2000 offsets since 1979,Chapter 1,Slide 29,Cost of achieving an 85%reduction in hydrocarbon emissions for DuPontThree Options85%reduction at each source plant(total cost=$105.7 million)85%reduction at each plant with internal trading(total cost=$42.6 million)85%reduction at all plants with internal and external trading(total cost=$14.6 million),Emissions Trading and Clean Air,Chapter 1,Slide 30,1990 Clean Air ActSince 1990,the cost of the permits has fallen from an expected$300 to below$100.Causes of the drop in permit prices More efficient abatement techniquesPrice of low sulfur coal has fallen,Emissions Trading and Clean Air,Chapter 1,Slide 31,RecyclingHouseholds can dispose of glass and other garbage at very low cost.The low cost of disposal creates a divergence between the private and the social cost of disposal.,Ways of Correcting Market Failure,Chapter 1,Slide 32,The Efficient Amount of Recycling,Scrap,Cost,0,4,8,12,Chapter 1,Slide 33,Refundable Deposits,Amount of Glass,$,Price falls to P and the amount of recycled glass increases to M*.,Chapter 1,Slide 34,Externalities and Property Rights,Property RightsLegal rules describing what people or firms may do with their propertyFor exampleIf residents downstream owned the river(clean water)they control upstream emissions.,Chapter 1,Slide 35,Bargaining and Economic EfficiencyEconomic efficiency can be achieved without government intervention when the externality affects relatively few parties and when property rights are well specified.,Externalities and Property Rights,Chapter 1,Slide 36,Profits Under AlternativeEmissions Choices(Daily),No filter,not treatment plant500100600Filter,no treatment plant300500800No filter,treatment plant500200700Filter,treatment plant300300600,FactorysFishermensTotalProfitProfitProfit,Chapter 1,Slide 37,AssumptionsFactory pays for the filterFishermen pay for the treatment plantEfficient SolutionBuy the filter and do not build the plant,Externalities and Property Rights,Chapter 1,Slide 38,Bargaining with Alternative Property Rights,No CooperationProfit of factory$500$300Profit of fishermen$200$500CooperationProfit of factory$550$300Profit of fishermen$250$500,Right to DumpRight to Clean Water,Chapter 1,Slide 39,Conclusion:Coase TheoremWhen parties can bargain without cost and to their mutual advantage,the resulting outcome will be efficient,regardless of how the property rights are specified.,Externalities and Property Rights,Chapter 1,Slide 40,Costly Bargaining-The Role of Strategic BehaviorBargaining requires clearly defined rules and property rights.,Externalities and Property Rights,Chapter 1,Slide 41,A Legal Solution-Suing for DamagesFishermen have the right to clean waterFactory has two optionsNo filter,pay damagesProfit=$100($500-$400)Filter,no damagesProfit=$300($500-$200),Externalities and Property Rights,Chapter 1,Slide 42,A Legal Solution-Suing for DamagesFactory has the right to emit effluentFishermen have three optionsPut in treatment plantProfit=$200Filter and pay damagesProfit=$300($500-$200)No plant,no filterProfit=$100,Externalities and Property Rights,Chapter 1,Slide 43,ConclusionA suit for damages results in an efficient outcome.QuestionHow would imperfect information impact the outcome?,Externalities and Property Rights,Chapter 1,Slide 44,The Coase Theorem at Work,Negotiating an Efficient Solution1987-New York garbage spill(200 tons)littered the New Jersey beachesThe potential cost of litigation resulted in a solution that was mutually beneficial to both parties.,Chapter 1,Slide 45,Common Property Resources,Common Property ResourceEveryone has free access.Likely to be overutilizedExamplesAir and waterFish and animal populationsMinerals,Chapter 1,Slide 46,Common Property Resources,Fish per Month,Benefits,Costs($perfish),Chapter 1,Slide 47,Common Property Resources,SolutionPrivate ownershipQuestionWhen would private ownership be impractical?,Chapter 1,Slide 48,Crawfish Fishing in Lousiana,Finding the Efficient Crawfish CatchF=crawfish catch in millions of pounds/yrC=cost in dollars/pound,Chapter 1,Slide 49,Crawfish Fishing in Lousiana,DemandC=0.401=0.0064FMSCC=-5.645+0.6509FPCC=-0.357+0.0573F,Chapter 1,Slide 50,Crawfish Fishing in Lousiana,Efficient Catch9.2 million poundsD=MSC,Chapter 1,Slide 51,Crawfish Catch(millions of pounds),CCost(dollars/pound),Crawfish as a CommonProperty Resource,Chapter 1,Slide 52,Public Goods,QuestionWhen should government replace firms as the producer of goods and services?,Chapter 1,Slide 53,Public Goods,Public Good CharacteristicsNonrivalFor any given level of production the marginal cost of providing it to an additional consumer is zero.NonexclusivePeople cannot be excluded from consuming the good.,Chapter 1,Slide 54,Public Goods,Not all government produced goods are public goodsSome are rival and nonexclusiveEducationParks,Chapter 1,Slide 55,Efficient Public Good Provision,Output,0,Benefits(dollars),1,2,3,4,5,6,7,8,10,9,$4.00,$5.50,$7.00,Chapter 1,Slide 56,Public Goods,Public Goods and Market FailureHow much national defense did you consume last week?,Chapter 1,Slide 57,Public Goods,Free RidersThere is no way to provide some goods and services without benefiting everyone.Households do not have the incentive to pay what the item is worth to them.Free riders understate the value of a good or service so that they can enjoy its benefit without paying for it.,Chapter 1,Slide 58,Public Goods,Establishing a mosquito abatement companyHow do you measure output?Who do you charge?A mosquito meter?,Chapter 1,Slide 59,The Demand for Clean Air,Clean Air is a public goodNonexclusive and nonrivalWhat is the price of clean air?,Chapter 1,Slide 60,The Demand for Clean Air,Choosing where to liveStudy in Boston correlates housing prices with the quality of air and other characteristics of the houses and their neighborhoods.,Chapter 1,Slide 61,The Demand for Clean Air,Nitrogen Oxides(pphm),0,Dollars,1,2,3,4,5,6,7,8,10,9,2000,2500,3000,500,1500,1000,Chapter 1,Slide 62,The Demand for Clean Air,FindingsAmount people are willing to pay for clean air increases substantially as pollution increases.Higher income earners are willing to pay more(the gap between the demand curves widen)National Academy of Sciences found that a 10%reduction in auto emissions yielded a benefit of$2 billion-somewhat greater than the cost.,Chapter 1,Slide 63,Private Preferences for Public Goods,Government production of a public good is advantageous because the government can assess taxes or fees to pay for it.Determining how much of a public good to provide when free riders exist is difficult.,Chapter 1,Slide 64,Determining the Levelof Educational Spending,Educational spendingper pupil,$0,Willingnessto pay$,$1200,$600,$1800,$2400,The efficient level of educational spending is determined by summing thewillingness to pay for education for eachof three citizens.,Chapter 1,Slide 65,Determining the Levelof Educational Spending,Educational spendingper pupil,$0,Willingnessto pay$,$1200,$600,$1800,$2400,Will majority rule yield an efficient outcome?W1 will vote for$600W2 and W3 will vote for$1200The median vote will always win in a majorityrule election.,Chapter 1,Slide 66,QuestionWill the median voter selection always be efficient?AnswerIf two of the three preferred$1200 there would be overinvestment.If two of the three preferred$600 there would be underinvestment.,Private Preferences for Public Goods,Chapter 1,Slide 67,Majority rule is inefficient because it weighs each citizens preference equally-the efficient outcome weighs each citizens vote by his or her strength of preference.,Private Preferences for Public Goods,Chapter 1,Slide 68,Summary,There is an externality when a producer or a consumer affects the production or consumption activities of others in a manner that is not directly reflected in the market.Pollution can be corrected by emission standards,emissions fees,marketable emissions permits,or by encouraging recycling.,Chapter 1,Slide 69,Summary,Inefficiencies due to market failure may be eliminated through private bargaining among the affected parties.Common property resources are not controlled by a single person and can be used without a price being paid.,Chapter 1,Slide 70,Summary,Goods that private markets are not likely to produce efficiently are either nonrival or nonexclusive.Public goods are both.A public good is provided efficiently when the vertical sum of the individual demands for the public good is equal to the marginal cost of producing it.,Chapter 1,Slide 71,Summary,Under majority rule voting,the level of spending provided will be that preferred by the median voter-this need not be the efficient outcome.,End of Chapter 18,Externalities and Public Goods,