econ 100a lecture 20

econ 100a lecture 20 - COMMENTS ON LAST TWO CHAPTERS...

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COMMENTS ON LAST TWO CHAPTERS (EXTERNALITIES AND GOVERNMENT) EXTERNALITITES è THE COASE THEOREM essence: 1. incompatible activities, 2. competing claims to property rights, and 3. ability of parties to both understand the issues involved and to negotiate first situation arises often .on a global as well as individual level second issues arises around issues like "personal freedom," and "national sovereignty" third case, while fairly limited, examples do exist in reality---see Frank s example of Austria and Slovakia (nuclear power plants ."don t build, and we ll give you the power" p. 592; cases in the US where "polluters" seek to buy out land owners . HOWEVER; absent these conditions, conflict must be solved (if it is to be solved) outside of the market .government rules (no smoking), but issue gets harder when activities cross national boundaries Kyoto Treaty as an example . SIMPLE COASE EXAMPLE------(pointing out that it makes no difference who "owns" the property rights .using two adjacent frims Joe's Sky Diving Fun and Pete's Alligator Farm no matter who has the property rights, assuming they agree on costs, firm with lowest cost will move, either by being bribed (assuming low cost firm holds the property rights) or will be kicked out by high cost firm TRAGEDY OF THE COMMONS based on an essay by Garrett Hardin (Science, around 1968---Melvyl lists 46 references under MAGS .most with reference to the environment .one on immigration ) è Problem of "common ownership" which is usually seen as NO
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econ 100a lecture 20 - COMMENTS ON LAST TWO CHAPTERS...

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