In: Economics
Is this issue of externalities (the tragedy of the commons) a worthwhile issue for people and governments to focus on? Do you have examples of where you were affected by an externality? What actions do you think are reasonable to prevent negative externalities like overfishing, over foresting, etc?
Yes the issue of Externalities is a worthwhile issue for people and governments to focus on.
Externality: Externalities arise whenever the actions of
one
economic agent make another economic agent worse or better off, yet
the first agent neither bears the costs nor receives the benefits
of doing so:
Example: a steel plant that pollutes a river used for recreation
.
Example where I affected by Externalities: There is a battery factory near my house which emitted toxic air from it's chimney so I have to take breath in that polluted air which affects my health.
There are two classes of tools in the government’s arsenal for
dealing with externalities: price-based measures (taxes and
subsidies) and quantity-based measures (regulation).
Which of these methods will lead to the most efficient regulatory
outcome depends on factors such as the heterogeneity of the firms
being regulated, the flexibility embedded in quantity regulation,
and the uncertainty over the costs of externality reduction. So
govt can increase tax on over fishing or can limited the quantity
of fishing or foresting.