EC120 Lecture Notes - Lecture 12: Lawrence Summers, Coase Theorem, Environmental Quality
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EC120 Full Course Notes
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Restoration of historic buildings, spending on gardens. Barking dogs, and other forms of noise. Local noise bylaws with fines for excessive noise. Positive externality if resulting knowledge can be used. Patent systems, public investment in basic research. Many externalities associated with driving: inelastic demand for gasoline (taxes are efficient, congestion externalities. As more people drive, traffic slows everyone down: more drivers means more accidents. Larger vehicles cause more damage: pollution. Gas taxes reduce the use of gasoline, reducing emissions. Further subsidies to technology development (tax breaks) Actions can be limited/promoted by legal requirement. Government prohibition raises the cost of drunk driving. Education is believed to create positive externalities. Children under age 16 must attend school. Required use of catalytic converters in cars. Efficient regulation requires extensive knowledge about costs and alternatives. Pigouvian taxes - a tax to reduce output with negative externalities. Taxes alter the private use of resources. Tax on gasoline will reduce the use of gasoline.
