10.27.08 - ECONOMICS 1 Professor Kenneth Train Lecture 17...

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ECONOMICS 1 Professor Kenneth Train 10/27/08 Lecture 17 ASUC Lecture Notes Online is the only authorized note-taking service at UC Berkeley. Do not share, copy or illegally distribute (electronically or otherwise) these notes. Our student-run program depends on your individual subscription for its continued existence. These notes are copyrighted by the University of California and are for your personal use only. D O N O T C O P Y Sharing or copying these notes is illegal and could end note taking for this course. LECTURE PUBLIC POLICY FOR CARS Today is our last lecture on microeconomics. It is very policy oriented and I want to talk specifically about public policy with regards to cars. This entails market forms of various kinds. They’re also interesting because the policies that deal with cars interact to complement each other. I want to describe the whole procedure for new policies in the future. EXTERNALITIES FOR CARS First, vehicle use. There are a lot of externalities associated with it, most prominently pollution: Pollution Driving a car produces emissions that have a toxic effect on the atmosphere, which causes global warming. Local toxins have only a localized effect. For example, back in the 1980s, the whole L.A. area was covered with smog. That’s how they differ from global warming toxins. Dependence on Foreign Oil There’s also dependence on foreign oil. This gives foreign countries an ability to manipulate our economy in a way that’s not useful to us. Congestion When you drive you create congestion with others who are also trying to drive on the same road. The roads we have are public goods, and the congestion is a kind of public failure. We need to allocate the cost of building roads over the group of people who will use it and thus be willing to pay for it. Reducing Externalities There are many ways to deal with these externalities: - gas tax - fuel efficiency standards - fee-bates: rebates on efficient cars To talk about this I want to get some basic concepts across about where fuel consumption comes from: To decrease fuel consumption we can either decrease the number of miles people drive (VMT) or increase the fuel efficiency of the vehicle (mpg.) GAS TAX
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ECONOMICS 1 ASUC Lecture Notes Online: Approved by the UC Board of Regents 10/27/08 D O N O T C O P Y Sharing or copying these notes is illegal and could end note taking for this course. 2 We have very hefty taxes because revenues from the gas tax are used for the construction and maintenance of roads. People end up paying in proportion to how much fuel they use. It’s mostly in the form of sales tax, which is in proportion to how much gas you consume. This is an interesting way of handling externalities and public goods. Advantages of a Gas Tax
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This note was uploaded on 07/25/2011 for the course ECON 1 taught by Professor Martholney during the Fall '08 term at Berkeley.

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10.27.08 - ECONOMICS 1 Professor Kenneth Train Lecture 17...

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