1. Environmental Economics; Externalities
Taylor Chapters 14-15

2. Externality = external effect
An uncompensated effect on others.
Why negative externalities?
Are externalities a market failure?

3. Why negative externalities?
Absence of enforced property rights.
Pure free market: invasion requires compensation; cost is internalized.

4. Handling externalities
Nothing (cell phones)
Social disapproval (bad language)
Negotiation (loud music)
Merging (land by airport)
Torts - law suits (neighbor’s barking dogs)
Command and control, regulation (smog checks, smoking).
Pollution charges (cars).