最新外部性与公共物品幻灯片.ppt

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1、外部性与公共物品外部性与公共物品Chapter 1Slide 2Topics to be DiscussednExternalitiesnWays of Correcting Market FailurenExternalities and Property RightsnCommon Property ResourcesChapter 1Slide 9ExternalitiesnPositive Externalities and InefficiencylExternalities can also result in too little production, as can be sh

2、own in an example of home repair and landscaping.Chapter 1Slide 10MCP1External BenefitsRepair LevelValueDIs research and development discouraged by positiveexternalities?q1MSBMEBWhen there are positiveexternalities (the benefitsof repairs to neighbors),marginal social benefitsMSB are higher thanmarg

3、inal benefits D.q*P*A self-interested home ownerinvests q1 in repairs. Theefficient level of repairsq* is higher. The higher priceP1 discourages repair.Chapter 1Slide 11Ways of Correcting Market FailurenAssumption: The market failure is pollutionlFixed-proportion production technologyuMust reduce ou

4、tput to reduce emissionsuUse an output tax to reduce outputlInput substitution possible by altering technologyChapter 1Slide 12The Efficient Level of EmissionsLevel of Emissions246Dollarsper unitof Emissions02468101214161820222426MSCMCAE*The efficient level ofemissions is 12 (E*) where MCA = MSC.Ass

5、ume:1) Competitive market2) Output and emissions decisions are independent3) Profit maximizing output chosenAt Eo the marginalcost of abating emissionsis greater than themarginal social cost.E0At E1 the marginalsocial cost is greaterthan the marginal benefit.E1Why is this more efficientthan zero emi

6、ssions?Chapter 1Slide 13Ways of Correcting Market FailurenOptions for Reducing Emissions to E*lEmission StandarduSet a legal limit on emissions at E* (12)uEnforced by monetary and criminal penaltiesuIncreases the cost of production and the threshold price to enter the industryChapter 1Slide 14Standa

7、rds and FeesLevel of EmissionsDollarsper unitof EmissionsMSCMCA312E*StandardFeeChapter 1Slide 15nOptions for Reducing Emissions to E*lEmissions FeeuCharge levied on each unit of emissionWays of Correcting Market FailureChapter 1Slide 16TotalAbatement CostCost is less than thefee if emissions were no

8、t reduced.Total Feeof AbatementStandards and FeesLevel of EmissionsDollarsper unitof EmissionsMSCMCA312E*FeeChapter 1Slide 17nStandards Versus FeeslAssumptionsuPolicymakers have asymmetric informationuAdministrative costs require the same fee or standard for all firmsWays of Correcting Market Failur

9、eChapter 1Slide 18Firm 2s ReducedAbatementCostsFirm 1s IncreasedAbatement CostsMCA1MCA2The Case for FeesLevel of Emissions246Fee perUnit ofEmissions01234567891011121313514The cost minimizing solutionwould be an abatement of 6for firm 1 and 8 for firm 2 andMCA1= MCA2 = $3.3.752.50The impact of a stan

10、dard ofabatement of 7 for both firmsis illustrated.Not efficient becauseMCA2 MCA1.If a fee of $3 was imposedFirm 1 emissions would fallby 6 to 8. Firm 2 emissionswould fall by 8 to 6.MCA1 = MCA2: efficient solution.Chapter 1Slide 19nAdvantages of FeeslWhen equal standards must be used, fees achieve

11、the same emission abatement at lower cost.lFees create an incentive to install equipment that would reduce emissions further.Ways of Correcting Market FailureChapter 1Slide 20ABC is the increasein social cost less thedecrease in abatementcost.MarginalSocialCostMarginal Costof AbatementThe Case for S

12、tandardsLevel of EmissionsFee perUnit ofEmissions0246810121416246810121416EBased on incompleteinformation standard is 9(12.5% decrease).ADE m*.Chapter 1Slide 33Refundable DepositsAmount of Glass$DPrice falls to P and the amount of recycled glass increases to M*.SvSrSThe supply of glass is the sum of

13、 the supplyof virgin glass (Sr) and the supply of recycledglass (Sr).M1PWithout refunds the price of glass is P and Sr is M1.SrSPM*With refunds Sr increasesto Sr and S increases to S.Chapter 1Slide 34Externalities and Property RightsnProperty RightslLegal rules describing what people or firms may do

14、 with their propertylFor exampleuIf residents downstream owned the river (clean water) they control upstream emissions.Chapter 1Slide 35nBargaining and Economic EfficiencylEconomic efficiency can be achieved without government intervention when the externality affects relatively few parties and when

15、 property rights are well specified.Externalities and Property RightsChapter 1Slide 36Profits Under AlternativeEmissions Choices (Daily)No filter, not treatment plant500100600Filter, no treatment plant300500800No filter, treatment plant500200700Filter, treatment plant300300600FactorysFishermensTotal

16、ProfitProfitProfitChapter 1Slide 37nAssumptionslFactory pays for the filterlFishermen pay for the treatment plantnEfficient SolutionlBuy the filter and do not build the plantExternalities and Property RightsChapter 1Slide 38Bargaining with Alternative Property RightsNo CooperationProfit of factory$5

17、00$300Profit of fishermen$200$500CooperationProfit of factory$550$300Profit of fishermen$250$500Right to Dump Right to Clean WaterChapter 1Slide 39nConclusion: Coase TheoremlWhen parties can bargain without cost and to their mutual advantage, the resulting outcome will be efficient, regardless of ho

18、w the property rights are specified.Externalities and Property RightsChapter 1Slide 40nCostly Bargaining - The Role of Strategic BehaviorlBargaining requires clearly defined rules and property rights.Externalities and Property RightsChapter 1Slide 41nA Legal Solution - Suing for DamageslFishermen ha

19、ve the right to clean waterlFactory has two optionsuNo filter, pay damageslProfit = $100 ($500 - $400)uFilter, no damageslProfit = $300 ($500 - $200)Externalities and Property RightsChapter 1Slide 42nA Legal Solution - Suing for DamageslFactory has the right to emit effluentlFishermen have three opt

20、ionsuPut in treatment plantlProfit = $200uFilter and pay damageslProfit = $300 ($500 - $200)uNo plant, no filterlProfit = $100Externalities and Property RightsChapter 1Slide 43nConclusionlA suit for damages results in an efficient outcome.nQuestionlHow would imperfect information impact the outcome?

21、Externalities and Property RightsChapter 1Slide 44The Coase Theorem at WorknNegotiating an Efficient Solutionl1987 - New York garbage spill (200 tons) littered the New Jersey beachesuThe potential cost of litigation resulted in a solution that was mutually beneficial to both parties.Chapter 1Slide 4

22、5Common Property ResourcesnCommon Property ResourcelEveryone has free access.lLikely to be overutilizedlExamplesuAir and wateruFish and animal populationsuMineralsChapter 1Slide 46Common Property ResourcesFish per MonthBenefits,Costs($ perfish)DemandHowever, private costsunderestimate true cost.The

23、efficient level of fish/month is F* whereMSC = MB (D)Marginal Social CostF*Private CostFCWithout control the numberof fish/month is FC where PC = MB.Chapter 1Slide 47Common Property ResourcesnSolutionlPrivate ownershipnQuestionlWhen would private ownership be impractical?Chapter 1Slide 48Crawfish Fi

24、shing in LousiananFinding the Efficient Crawfish CatchlF = crawfish catch in millions of pounds/yrlC = cost in dollars/poundChapter 1Slide 49Crawfish Fishing in LousiananDemandlC = 0.401 = 0.0064FnMSClC = -5.645 + 0.6509FnPClC = -0.357 + 0.0573FChapter 1Slide 50Crawfish Fishing in LousiananEfficient

25、 Catchl9.2 million poundslD = MSCChapter 1Slide 51Crawfish Catch(millions of pounds)CCost(dollars/pound)DemandMarginal Social CostPrivate CostCrawfish as a CommonProperty Resource11.92.109.20.325Chapter 1Slide 52Public GoodsnQuestionlWhen should government replace firms as the producer of goods and

26、services?Chapter 1Slide 53Public GoodsnPublic Good CharacteristicslNonrivaluFor any given level of production the marginal cost of providing it to an additional consumer is zero.lNonexclusiveuPeople cannot be excluded from consuming the good.Chapter 1Slide 54Public GoodsnNot all government produced

27、goods are public goodslSome are rival and nonexclusiveuEducationuParksChapter 1Slide 55D1D2DWhen a good is nonrival, the social marginalbenefit of consumption (D) , is determined byvertically summing the individual demand curves for the good.Efficient Public Good ProvisionOutput0Benefits(dollars)123

28、45678109$4.00$5.50$7.00Marginal Cost$1.50Efficient output occurswhere MC = MB at 2units of output. MB is$1.50 + $4.00 or $5.50.Chapter 1Slide 56Public GoodsnPublic Goods and Market FailurelHow much national defense did you consume last week?Chapter 1Slide 57Public GoodsnFree RiderslThere is no way t

29、o provide some goods and services without benefiting everyone.lHouseholds do not have the incentive to pay what the item is worth to them.lFree riders understate the value of a good or service so that they can enjoy its benefit without paying for it.Chapter 1Slide 58Public GoodsnEstablishing a mosqu

30、ito abatement companylHow do you measure output?lWho do you charge?lA mosquito meter?Chapter 1Slide 59The Demand for Clean AirnClean Air is a public goodlNonexclusive and nonrivalnWhat is the price of clean air?Chapter 1Slide 60The Demand for Clean AirnChoosing where to livelStudy in Boston correlat

31、es housing prices with the quality of air and other characteristics of the houses and their neighborhoods.Chapter 1Slide 61The Demand for Clean AirNitrogen Oxides (pphm)0Dollars1234567810920002500300050015001000Low IncomeMiddle IncomeHigh IncomeChapter 1Slide 62The Demand for Clean AirnFindingslAmou

32、nt people are willing to pay for clean air increases substantially as pollution increases.lHigher income earners are willing to pay more (the gap between the demand curves widen)lNational Academy of Sciences found that a 10% reduction in auto emissions yielded a benefit of $2 billion-somewhat greate

33、r than the cost.Chapter 1Slide 63Private Preferences for Public GoodsnGovernment production of a public good is advantageous because the government can assess taxes or fees to pay for it.nDetermining how much of a public good to provide when free riders exist is difficult.Chapter 1Slide 64Determinin

34、g the Levelof Educational SpendingEducational spendingper pupil$0Willingnessto pay$1200$600$1800$2400W1W2W3AWThe efficient level of educational spending is determined by summing thewillingness to pay for education for eachof three citizens.Chapter 1Slide 65Determining the Levelof Educational Spendin

35、gEducational spendingper pupil$0Willingnessto pay$1200$600$1800$2400W1W2W3AWWill 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 1Slide 66nQuestionlWill the median voter selection always be

36、efficient?nAnswerlIf two of the three preferred $1200 there would be overinvestment.lIf two of the three preferred $600 there would be underinvestment.Private Preferences for Public GoodsChapter 1Slide 67nMajority rule is inefficient because it weighs each citizens preference equally-the efficient o

37、utcome weighs each citizens vote by his or her strength of preference.Private Preferences for Public GoodsChapter 1Slide 68SummarynThere 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

38、.nPollution can be corrected by emission standards, emissions fees, marketable emissions permits, or by encouraging recycling.Chapter 1Slide 69SummarynInefficiencies due to market failure may be eliminated through private bargaining among the affected parties.nCommon property resources are not contr

39、olled by a single person and can be used without a price being paid.Chapter 1Slide 70SummarynGoods that private markets are not likely to produce efficiently are either nonrival or nonexclusive. Public goods are both.nA 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 1Slide 71SummarynUnder 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 18Externalities and Public Goods