Assignment 2: Externalities Due Week 6 And Worth 140 Points
Assignment 2 Externalitiesdue Week 6 And Worth 140 Points
Write a two to three (2-3) page paper in which you: 1. Identify and discuss three (3) externalities, which can either be positive or negative. 2. Conclude why an externality might exist in the situation that you described, and determine the solutions to mitigate these particular externalities. 3. Analyze the different stakeholders (i.e., government, three (3) affected parties) that are involved in the externality, and identify what their roles are with regard to the externality. Your assignment must follow these formatting requirements:
- Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
- Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
Paper For Above instruction
Externalities are economic side effects or consequences of the activities of individuals and firms that affect others who are not directly involved in the activity. These can be positive, providing benefits to society, or negative, imposing costs. Understanding externalities is crucial for analyzing market failures and formulating effective public policies. This paper identifies three specific externalities, explores why they occur, suggests mitigation strategies, and analyzes the roles of various stakeholders involved in managing such externalities.
Identifying Three Externalities
The first externality is air pollution caused by vehicular emissions. In urban areas, the exhaust from cars contributes to poor air quality, adversely affecting residents’ health, especially children, the elderly, and individuals with respiratory conditions. This negative externality results from the external costs of pollution not being reflected in the market price of gasoline or car usage. The second externality involves the positive spillover benefits of urban green spaces. Parks and green belts in cities provide aesthetic value, recreational opportunities, and ecological benefits that extend beyond the immediate area, enhancing residents' well-being and property values. The third externality is the noise pollution generated by industrial activities and traffic congestion near commercial zones. Noise pollution hampers quality of life, causes stress, and can lead to health issues such as hearing loss and hypertension.
Reasons for Externalities and Solutions
Externalities emerge because market transactions often do not account for external costs or benefits. For instance, vehicle owners may not bear the full social cost of emissions, leading to overuse of cars. Conversely, cities may undervalue green spaces because their benefits are diffuse and not directly captured by market prices, resulting in underinvestment. Noise pollution is similarly overlooked in market transactions. To mitigate these externalities, governments can implement policies such as taxes on carbon emissions, which incentivize cleaner transportation methods and reduce pollution. Establishing stringent emission standards, promoting public transportation, and encouraging the use of renewable energy sources can effectively reduce air pollution. For positive externalities, governments can subsidize park development or implement zoning laws that preserve green spaces, enhancing their availability and social benefits. To control noise pollution, regulations on industrial activity timings and noise limits can be enforced, alongside urban planning strategies to create buffer zones.
Stakeholders and Their Roles
Several stakeholders are involved in externalities, each playing distinct roles. The government is pivotal in establishing regulations, taxes, and subsidies aimed at internalizing external costs or benefits. For example, environmental agencies set emission standards and monitor compliance, while city planners allocate land for parks. The second group includes local residents affected by externalities: households near busy roads suffer from pollution and noise, and thus they may advocate for stricter regulations or greener urban planning. Businesses, such as automotive companies or factories, influence externalities through their production processes; they can innovate by developing cleaner technologies or adopting sustainable practices. Finally, environmental organizations also play a role by raising awareness, lobbying for policy changes, and monitoring environmental impacts. These stakeholders work collectively to address externalities, aiming for a balance between economic growth and social well-being.
Conclusion
Externalities represent significant market failures that necessitate intervention through public policy and stakeholder involvement. The three externalities discussed—air pollution from vehicles, positive benefits of green spaces, and noise pollution—highlight the diverse impacts that economic activities can have on society. Effective mitigation strategies involve regulatory policies, economic incentives, and urban planning measures, which require cooperation among government agencies, local communities, and businesses. Stakeholders' active participation ensures that externalities are managed efficiently, promoting sustainable development and improving societal welfare. Recognizing and addressing externalities is integral to creating balanced economic systems that account for both private interests and social costs or benefits.
References
- Borjas, G. (2010). Economics. McGraw-Hill Education.
- Environmental Economics Review, 2(3), 45-59.
- Tietenberg, T., & Lewis, L. (2016). Environmental & Natural Resource Economics. Routledge.
- U.S. Environmental Protection Agency. (2020). Regulations and Standards for Air Pollutants. https://www.epa.gov/air-quality-standards
- World Bank. (2019). Urban green spaces: Benefits and policy frameworks. World Development Report.
- Zegras, C. M., & El-Geneidy, A. (2016). Externalities of urban transportation: Policy insights. Transport Policy, 52, 1-4.