1. Coase Theorem

3. Negative Externalities

5. IONE, Oregon. — Residents of the remote high-desert hills near here have recently become familiar with the little-known economic idea – the Coase Theorem. IONE, Oregon. — Residents of the remote high-desert hills near here have recently become familiar with the little-known economic idea – the Coase Theorem.

8. Residents in small towns are fighting proposed projects, raising concerns about Residents in small towns are fighting proposed projects, raising concerns about

9. Residents in small towns are fighting proposed projects, raising concerns about threats to birds and big game, as well as about the way the giant towers and their blinking lights spoil some of the West’s most alluring views. Residents in small towns are fighting proposed projects, raising concerns about threats to birds and big game, as well as about the way the giant towers and their blinking lights spoil some of the West’s most alluring views.

10. Patricia Pilz of Caithness Energy, a big company from New York that is helping make this part of Eastern Oregon one of the fastest-growing wind power regions in the country, is making a tempting offer: Patricia Pilz of Caithness Energy, a big company from New York that is helping make this part of Eastern Oregon one of the fastest-growing wind power regions in the country, is making a tempting offer:

11. sign a contract saying you will not complain about excessive noise from the turning turbines — the whoosh, whoosh, whoosh of the future, advocates say — and she will give you a check for $5,000. sign a contract saying you will not complain about excessive noise from the turning turbines — the whoosh, whoosh, whoosh of the future, advocates say — and she will give you a check for $5,000.

13. Negative externality When net social costs exceed net private costs.

14. What systems have we in place to prevent or reduce these social costs?

15. Imagine a vegetable farm and a dairy farm next to each other. The dairyfarmer’s cows wander over to the other farm and damage the vegetables crops. Imagine a vegetable farm and a dairy farm next to each other. The dairyfarmer’s cows wander over to the other farm and damage the vegetables crops. The farmers have an incentive to bargain with each other to find an efficient solution. If it is more efficient to prevent cattle trampling a farmer's field by fencing in the farm, rather than fencing in the cattle, the outcome of the bargaining will be the fence around the farm. The farmers have an incentive to bargain with each other to find an efficient solution. If it is more efficient to prevent cattle trampling a farmer's field by fencing in the farm, rather than fencing in the cattle, the outcome of the bargaining will be the fence around the farm.

16. Nudge economics – little green feet and smiley faces will not stop this…

17. Coase Theorem Coase Theorem: When property rights are extended and clearly defined, polluting firms are incentivised to pollute less, as they fear negative legal consequences. Coase Theorem: When property rights are extended and clearly defined, polluting firms are incentivised to pollute less, as they fear negative legal consequences.

18. Clearly defined property rights. Therefore the damage done to the air has to be paid for by the polluting firms. This increases the costs for the power plant, thus reducing the supply and eliminating the welfare loss triangle. Clearly defined property rights. Therefore the damage done to the air has to be paid for by the polluting firms. This increases the costs for the power plant, thus reducing the supply and eliminating the welfare loss triangle.

19. Extending Property Rights Extending Property Rights is a way of internalising the externality. Extending Property Rights is a way of internalising the externality.

20. Advantages with Extending the Property Rights – the compensation goes directly to the party affected. Advantages with Extending the Property Rights – the compensation goes directly to the party affected.

21. By extending property rights, we find a more efficient solution to the problem than By extending property rights, we find a more efficient solution to the problem than Taxes, subsidies, government fines,

22. Disadvantages to the Coarse Therom Cannot work internationally. If Italian power plants pollute Swiss mountains, what can you do? Cannot work internationally. If Italian power plants pollute Swiss mountains, what can you do? Assessing the damage is difficult Assessing the damage is difficult Involves costly and lengthy legal proceedings Involves costly and lengthy legal proceedings

23. Alternatives to Coarse Therom Regulations – you can only produce e amount of pollution from your factors. Regulations – you can only produce e amount of pollution from your factors. Taxes – place extra high taxes on goods that are noted for producing a negative externality – sports cars and cigarettes. Taxes – place extra high taxes on goods that are noted for producing a negative externality – sports cars and cigarettes. Permits – particularly evident pubs and nightclubs. Permits – particularly evident pubs and nightclubs. All three involve government intervention All three involve government intervention