IBE316-9 - IBE 316 Economic Policy Stiglitz: Economics of...

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IBE 316 Economic Policy Stiglitz: Economics of the Public Sector Chapter 9: Externalities and the Environment Keisuke OTSU Sophia University FLA Spring 2008 OTSU (Sophia University FLA) IBE 316 Spring 2008 1 / 17
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Announcement Midterm Midterm review: Tuesday, June 3rd General review of the course and sample questions for the midterm Midterm: Friday, June 6th OTSU (Sophia University FLA) IBE 316 Spring 2008 2 / 17
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Overview Focus Questions What are externalities How do private markets respond to externalities? What are the principal ways by which the public sector attempts to deal with externalities? What currently are the major environmental public policy issues? OTSU (Sophia University FLA) IBE 316 Spring 2008 3 / 17
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Overview Four major pollution-related diseases in Japan Minamata disease (Kumamoto): mercury (water contamination) Niigata Minamata disease (Niigata): mercury (water contamination) Yokkaichi asthma (Mie): sulfur oxide smog (air pollution) Itai-itai disease (Toyama): cadmium (soil contamination) OTSU (Sophia University FLA) IBE 316 Spring 2008 4 / 17
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The Problem of Externalities Externalities: whenever one undertakes an action that has an e/ect on another, for which the latter does not pay or is not paid The private cost is not equal to the social cost There will be overproduction of goods generating negative externalities There will be undersupply of goods generating positive externalities
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IBE316-9 - IBE 316 Economic Policy Stiglitz: Economics of...

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