第18章 Externalities and Public Goods.ppt

* * * * * * WAYS OF CORRECTING MARKET FAILURE 18.2 Many other countries have made greater efforts to encourage recycling than the United States. A number of proposals to encourage more recycling in the United States include a refundable deposit, curbside charge, and mandatory separation. Mandatory separation is perhaps the least desirable of the three alternatives. A recent case in Perkasie, Pennsylvania, shows that recycling programs can indeed be effective. Prior to implementation of a program combining all three economic incentives just described, the total amount of unseparated solid waste was 2573 tons per year. When the program was implemented, this amount fell to 1038 tons—a 59-percent reduction. As a result, the town saved $90,000 per year in disposal costs. STOCK EXTERNALITIES 18.3 ● stock externality Accumulated result of action by a producer or consumer which, though not accounted for in the market price, affects other producers or consumers. STOCK EXTERNALITIES 18.3 Stock Buildup and Its Impact How does the stock of a pollutant change over time? With ongoing emissions, the stock will accumulate, but some fraction of the stock, δ, will dissipate each year. Thus, assuming the stock starts at zero, in the first year, the stock of pollutant (S) will be just the amount of that year’s emissions (E): In general, the stock in any year t is given by the emissions generated that year plus the nondissipated stock from the previous year: If emissions are at a constant annual rate E, then after N years, the stock of pollutant will be As N becomes infinitely large, the stock will approach the long-run equilibrium level E/δ. STOCK EXTERNALITIES 18.3 Numerical Example Table 18.1 shows how the stock builds upover time. Note that after 100 years, the stock will reach a level of 4,337 units. (If this level of emissions continued forever, the stock will eventually approach E/δ = 100/.02 = 5,000 units.) Stock Buildup and Its Impact STOCK EXTERNALITIES 18.3 S