Externality - Revision history

DavidB4-bot: /* See also */clean up & uniformity

2016-07-13T12:17:57Z

‎See also: clean up & uniformity

Toadaron at 22:56, February 12, 2011

2011-02-12T22:56:00Z

Toadaron at 22:55, February 12, 2011

2011-02-12T22:55:13Z

Samwell: und

2007-09-07T22:44:53Z

und

Pkoad: New page: Externalities are the effects a transaction has on individuals or firms not part of the transaction. Externalities may be positive or negative. Pollution is an example of a negative extern...

2007-03-29T03:27:06Z

New page: Externalities are the effects a transaction has on individuals or firms not part of the transaction. Externalities may be positive or negative. Pollution is an example of a negative extern...

New page

Externalities are the effects a transaction has on individuals or firms not part of the transaction. Externalities may be positive or negative. Pollution is an example of a negative externality: a factory may produce pollution at the same time as it produces goods to be sold, but if the buyer of the goods is not harmed by the pollution, the factory will have no incentive to reduce or eliminate it. The pollution then becomes a negative externality affecting other individuals, who had not conducted any business with the factory.

In mathematical economics, an externality exists when the marginal cost (or benefit) is not the same as the marginal social cost (or benefit) for some good, where the marginal social cost is the marginal cost for the private actor plus the marginal value of effects on bystanders to the transaction.

Economic analysis demonstrates that goods with negative externalities will always be over-produced, and those with positive externalities always under-produced. A situation in which externalities exist is not socially optimal, and society may wish to force its economic agents to internalize their externalities - that is, to produce as much or as little of the externality as would be efficient. The two mechanisms for internalizing external effects are government regulation (or tax-based incentives) and special markets created for trading in the former externality (for example, the market for pollution credits).

Marginal analysis holds that when all externalities have been internalized, the marginal social cost of every good (or bad) equals its marginal social benefit. Such a situation is sometimes referred to as a Kaldor-Hicks social optimum.

[[Category:Economics]]

@@ Line 7: / Line 7: @@
 Marginal analysis holds that when all externalities have been internalized, the marginal social cost of every good (or bad) equals its marginal social benefit. Such a situation is sometimes referred to as a Kaldor-Hicks social optimum.
-==See Also==
+==See also==
 [[Coase theorem]]
 [[Category:Economics]]

← Older revision		Revision as of 22:56, February 12, 2011
Line 6:		Line 6:

	Marginal analysis holds that when all externalities have been internalized, the marginal social cost of every good (or bad) equals its marginal social benefit. Such a situation is sometimes referred to as a Kaldor-Hicks social optimum.		Marginal analysis holds that when all externalities have been internalized, the marginal social cost of every good (or bad) equals its marginal social benefit. Such a situation is sometimes referred to as a Kaldor-Hicks social optimum.
		+
		+	==See Also==
		+	[[Coase theorem]]


	[[Category:Economics]]		[[Category:Economics]]

← Older revision		Revision as of 22:55, February 12, 2011
Line 1:		Line 1:
−	'''Externalities''' are the effects a transaction has on individuals or firms not part of the transaction. Externalities may be positive or negative. [[Pollution]] is an example of a negative externality: a factory may produce pollution at the same time as it produces goods to be sold, but if the buyer of the goods is not harmed by the pollution, the factory will have no incentive to reduce or eliminate it. The pollution then becomes a negative externality affecting other individuals, who had not conducted any business with the factory.	+	'''Externalities''' are the effects a transaction has on individuals or firms not part of the transaction. They are usually considered to be a [[market failure]]. Externalities may be positive or negative. [[Pollution]] is an example of a negative externality: a factory may produce pollution at the same time as it produces goods to be sold, but if the buyer of the goods is not harmed by the pollution, the factory will have no incentive to reduce or eliminate it. The pollution then becomes a negative externality affecting other individuals, who had not conducted any business with the factory.

	In mathematical economics, an externality exists when the marginal [[cost]] (or benefit) is not the same as the marginal social cost (or benefit) for some good, where the marginal social cost is the marginal cost for the private actor plus the marginal value of effects on bystanders to the transaction.		In mathematical economics, an externality exists when the marginal [[cost]] (or benefit) is not the same as the marginal social cost (or benefit) for some good, where the marginal social cost is the marginal cost for the private actor plus the marginal value of effects on bystanders to the transaction.

@@ Line 1: / Line 1: @@
-Externalities are the effects a transaction has on individuals or firms not part of the transaction. Externalities may be positive or negative. Pollution is an example of a negative externality: a factory may produce pollution at the same time as it produces goods to be sold, but if the buyer of the goods is not harmed by the pollution, the factory will have no incentive to reduce or eliminate it. The pollution then becomes a negative externality affecting other individuals, who had not conducted any business with the factory.
+'''Externalities''' are the effects a transaction has on individuals or firms not part of the transaction. Externalities may be positive or negative. [[Pollution]] is an example of a negative externality: a factory may produce pollution at the same time as it produces goods to be sold, but if the buyer of the goods is not harmed by the pollution, the factory will have no incentive to reduce or eliminate it. The pollution then becomes a negative externality affecting other individuals, who had not conducted any business with the factory.
-In mathematical economics, an externality exists when the marginal cost (or benefit) is not the same as the marginal social cost (or benefit) for some good, where the marginal social cost is the marginal cost for the private actor plus the marginal value of effects on bystanders to the transaction.
+In mathematical economics, an externality exists when the marginal [[cost]] (or benefit) is not the same as the marginal social cost (or benefit) for some good, where the marginal social cost is the marginal cost for the private actor plus the marginal value of effects on bystanders to the transaction.
-Economic analysis demonstrates that goods with negative externalities will always be over-produced, and those with positive externalities always under-produced. A situation in which externalities exist is not socially optimal, and society may wish to force its economic agents to internalize their externalities - that is, to produce as much or as little of the externality as would be efficient. The two mechanisms for internalizing external effects are government regulation (or tax-based incentives) and special markets created for trading in the former externality (for example, the market for pollution credits).
+[[Economic]] analysis demonstrates that goods with negative externalities will always be over-produced, and those with positive externalities always under-produced. A situation in which externalities exist is not socially optimal, and society may wish to force its economic agents to internalize their externalities - that is, to produce as much or as little of the externality as would be efficient. The two mechanisms for internalizing external effects are government regulation (or tax-based incentives) and special markets created for trading in the former externality (for example, the market for pollution credits).
 Marginal analysis holds that when all externalities have been internalized, the marginal social cost of every good (or bad) equals its marginal social benefit. Such a situation is sometimes referred to as a Kaldor-Hicks social optimum.