In chapter 3 Charles Wheelan explains the need of Government
to deal with externalities in Market.
First example he used is with large cars. He says that he bought
a bigger car to be safer. However, the externality coming out of it is simple.
Bigger emissions. I wonder why doesn’t the market work in this case? Why do people
not react to other people giving higher cost to their living? If everyone would
care about and think long term in this example, than the cost of buying a car
would suit the exact cost, because people would put higher cost on other people
buying the bigger cars.
Furthermore he provides a funny example of externality. The
pleasure of seeing a nice view. I would have never considered it as an externality.
It is simply there to see.
No comments:
Post a Comment