The hottest Externalities Substack posts right now

Exploring new ideas is important, but they should be tested carefully to see if they work.
Sometimes, even if an idea works, it might have negative side effects that aren't worth it.
The best experiments are those that try new things without risking too much; it's all about learning and improving.

Government intervention is effective in correcting externalities because it has a stake in the outcome.
Governments struggle to address long-term externalities because they focus on short-term goals and lack incentives for future outcomes.
Markets can incentivize individuals to consider future consequences, making them potentially more effective than governments in addressing temporal externalities.

Market failures often lead to arguments for taxes or subsidies to correct them.
AC Pigou's neoclassical approach to externalities suggests using taxes and subsidies to internalize costs.
While Pigou's model is flawed for policy, it remains a useful tool for understanding third-party effects in economics.

Internalizing externalities through taxes or subsidies can improve efficiency and welfare.
Pareto-relevant externalities are those that impact the outcome; not all externalities need to be internalized.
Individual values and costs are subjective, and internalizing externalities may not always create additional welfare.

Markets don't fail, they fail to exist.
Coase's focus on transaction costs and property rights revolutionized thinking about market failure.
Reducing transaction costs and clarifying property rights can enable decentralized solutions to market failures.

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Consider creating a sustainability version of Mount Rushmore showcasing notable figures like Richard Sandor, Rachel Carson, and Gro Harlem Brundtland.
Richard Sandor made significant contributions to the financial world by pioneering interest rate futures contracts and emissions trading, leading to the creation of influential exchanges.
Sandor's mentor, Ronald Coase, emphasized the difficulties in designing markets and the importance of viewing failure as part of the learning process.

Enforcement costs play a crucial role in addressing externalities and policy solutions.
The Numbers Problem highlights complexities in deciding on the best solution for externalities.
Cooperation can be a key factor in tackling externalities, often leading to voluntary solutions.

Having more children could lead to more ideas and innovations that benefit society. More people might help drive technological progress.
Abortion can have negative effects on society because it reduces the number of potential new contributions from unborn children. This creates a cost to society, even if the immediate benefits are for the mother.
Just like with pollution, we might consider taxing abortions to offset their societal costs. This could help fund programs that support more births and balance the effects of abortions.