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Lecture 10

PUP 3002 Lecture 10: Chapter 6: Environmental Policy - Part 1/2
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Department
Political Science
Course Code
PUP 3002
Professor
Barrilleaux

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PUP3002 Professor Barrilleaux Florida State University Chapter 6 Lecture Notes (Part 1/2) Environmental Policy I. Environmental Policy A. Negative Externalities a. Environmental problems often arise in an unregulated free market b. When producing a good, the environment is often harmed. c. Members of society are harmed by environmental degradation d. The consumer and producer do not pay for damages e. The costs of pollution are socialized 1. A third party pays for pollution f. If consumer and producer don’t pay for the cost of pollution, they end up producing more of a good g. Inefficient outcome 1. When too much of certain good is produced or consumed relative to the overall costs and benefits to society. h. Examples 1. A factory that produces automobile tires and pollutes the air of the citizens living around the factory 2. Famers fertilize their crops with chemicals that leach into the ground water used by a community i. Tools for correcting externalities 1. Consumption tax- an added cost applied to a good or service thought to be generating a negative externality. a. Increases the cost of a good to incorporate the cost of the negative externality b. If the tax per unit equals the cost of externality per unit, societal consumption and production will be societally efficient. c. Problems with consumption taxes 1. Information problems a. Connecting the problem in complex scenarios b. Measuring damage c. Measuring compliance 2. Political problems a. May be politically damaging b. Political leaders do not want to upset constituents that may not favor a tax c. Examples: tax on gas, tax on high emission vehicle 2. Subsidy- payments from the government to an institution or individual in return for a behavioral choice a. Decreases cost of producing or consuming a good b. When the amount of a per unit subsidy reflects the added benefit to society that the production/consumption of a single good produces, the market will be efficient 3. Output standards- regulating practices or behaviors or firms or consumers a. Laws b. This involves the creation of bureaucracy to implement and enforce policies c. Pros and cons of output standards 1. Cons a. Creating a bureaucracy can be expensive b. Costs can outweigh the benefits 2. Pros a. Avoids the difficulty of calculating externality b. Politically feasible as citizens do not see directly the added costs in the price of a good. d. Democratic societies tend to favor output standards to taxes and subsidies B. Positive Externalities a. Private transactions between consumers and producers may produce positive benefits for a third party b. Because third parties do not pay for their benefits, the good is undersupplied c. Under-provision of a good is societally inefficient d. Examples: 1.Production of honey leads to pollination of local crops 2. Vaccines are given to keep your child from sickness which leads to a reduction of risk of sickness to all others. C. Public Opinion on the Environment a. Does the public support policies to protect the environment? b. To ascertain how the public really feels on environmental protection, it is useful to analyze 5 components of public attitude c. Direction 1. Direction refers to the level of support that a citizen assigns to a specific policy 2. In aggregate, citizens tend to be highly supportive of environmental protection d. Intensity 1. Intensity refers to how strongly a citizen feels about a given issue e. Salience 1. Salience is the relative importance of a given issue relative to other issues 2. While citizens desire environmental protection, they do not tend to vote on it or pressure government officials through other means 3. Average citizen simply cares more about other issues f. Knowledge g. Stability 1. Stability refers to how much volatility we observe in citizen attitude over time. h. But what kind of policies do citizens prefer? 1. Citizens demand environmental protection, but do not want to pay for it. 2. C
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