The undercover economist

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1. 8 October 2014 The Undercover Economist Chapter-4 1 The Undercover Economist -Tim Harford 2. 1 January 2015 The Undercover Economist Chapter-4 2 Crosstown Traffic Team-16 J.Jeyalakshmi R.Rachel T.Saravanan M.Surya Prakash 3. 8 October 2014 The Undercover Economist Chapter-4 3 Happy mans 3 Wishes Externality Side effect to buy standers Wish Never to upgrade Computer Software Doctor gives appropriate treatment Washington Without Pollution Reality We have no idea of Doctors treatment EXTERNALITY 4. 1 January 2015 The Undercover Economist Chapter-4 4 Prices-Marginal & Average UNIVERSITY TRAFFIC CONGESTION Better orange juice Better trains, cycles, routes, pedestrian crossings Scrapping upfront fees and charging people for what they drink Scrapping upfront fees and charging people for what they drive 5. 1 January 2015 The Undercover Economist Chapter-4 5 Pricing should reflect Damage Externality charging needs to strike right balance between pleasure and trouble Urban Drive Vs Rural Drive Making someone better off & No one worse off Marginal Price should reflect externality cost 6. 1 January 2015 The Undercover Economist Chapter-4 6 2 objections to Externality Charges Unfair tax aimed at poor drivers off the road Rich drivers afford to drive more and cause more environmental damage Poor people use bicycle , walk or take bus Poor people drive a lot pay large amount of tax Congestion Charge is true Congestion Charge is Useless 7. 1 January 2015 The Undercover Economist Chapter-4 7 Moral high ground of Environmentalism Pollution is illegal for poor and affordable for rich Why the rich should be allowed to pollute? People take advantage of externality charge Partial response- rich do not pollute for fun they do sensible trip 8. 1 January 2015 The Undercover Economist Chapter-4 8 Alternatives to Congestion Charging 9. 1 January 2015 The Undercover Economist Chapter-4 9 Is Life Worth?? Ideal Externality Charge addresses all the real external and only the real external charges Drivers---------- Charged---------- Densely populated area Drivers---------- Charged---------- For emitted pollutants in every trip Computers in car- Measure Congestion, Pollution Cannot Measure Peoples time Making Decision putting Value on our environment Eg: not buying smoke alarm-increasing chances to die 10. 1 January 2015 The Undercover Economist Chapter-4 10 Is Life Worth? nterest. 11. 1 January 2015 The Undercover Economist Chapter-4 11 Is Life Worth? Preference is not just deduced but actually defined by choices People Prefer on HOUSE PRICE & WAGES Nobody has best interest at heart quite as much as you do yourself !!! 12. 1 January 2015 The Undercover Economist Chapter-4 12 New Orleans Effect Congestion Charging change small decisions Externality Pricing attacks the problem but makes no assumption about the solution Camelback House 13. 1 January 2015 The Undercover Economist Chapter-4 13 Battling Pollution-Sulphur sulphur emission sulphur scrubber Power Generators initial resistance arguing Sulphur Scrubbers are expensive EPA auctions for right to emit Sulphur dioxide 14. 1 January 2015 The Undercover Economist Chapter-4 14 Battling Pollution-Sulphur Contd. Companies installed willingly rather than buying permits Carbon Emission Similar auction recommended by economists 15. 1 January 2015 The Undercover Economist Chapter-4 15 Handling of Externalities Tree Plantation- Neutralization-Not certain of charges Positive Externality Beautifying apartment bringing pleasure to streets no reward Negative Externality paying for tax pollutant Too much of Positive Externality- eg:Tree&Wall , I become richer/ Neighbor becomes richer