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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: TimF who wrote (15338)	3/28/2006 7:02:45 PM
From: Ilaine	Read Replies (1) \| Respond to of 540820

I could answer but I'd be more interested in an explanation as to how the free market operated in New Orleans on September 1, 2005.

To: TimF who wrote (15338)	3/28/2006 7:37:29 PM
From: Ilaine	Read Replies (1) \| Respond to of 540820

I have been trying to get my son to bring home some economics books for me but maybe tomorrow. I am interested in the idea of modelling externalities, especially negative externalities, because I am not entirely clear on the overlap between market failures and negative externalities. "Externality: Also called the Spillover Effect. This occurs when someone other than the buyer must share the benefits or costs of a product. The classic example is pollution. Factories can either treat pollution, which costs money, or dump it for free into the air or water. If the latter, customers may pay a reduced price for the product, but local citizens also pay a price in higher mortality and disease rates, less fertile land, environmental catastrophes, etc. Sometimes the spillover effect is both positive and negative. An airport benefits its customers, but it also subjects the local neighborhood to various externalities. Positive ones include increased local business; negative ones include noise pollution. The problem of negative externalities is a significant one for those who believe in the efficacy of free markets. The Coase theorem is an attempt to resolve it. (See also Coase theorem.) " home.att.net "Coase theorem: An economic theorem which attempts to solve the problem of externalities like pollution by specifying who has property rights to previously unowned entities like air or water. The Coase theorem has two starting assumptions. First, property rights must be well-defined. Second, negotiations for polluting rights between polluter and neighbor must be costless (that is, not derailed by huge legal battles or stubborn, expensive negotiations). If these two criteria are met, then the amount of pollution will be efficient and identical no matter who is given property rights to the air or water. Conservatives present this as a private alternative to public regulation. Liberals criticize it for a number of shortcomings, chief among them that it results in more pollution. (See also externality.)" home.att.net Since you know I am a lawyer, you can imagine how impressed I am with the Coase theorem. You can't assume away huge legal battles or stubborn, expensive negotiations.