Since pollution is an externality firms will not undertake to control their pollution. The answer is in government regulations. Coase argues that in perfect competition with laissez faire, govt regulation is not needed. Instead bargaining between the polluters and their victims can lead to an optimal situation. But this pre supposes equality in bargaining, and does not take note of ecological consequences of pollution.
Since pollution is an externality firms will not undertake to control their pollution. The answer is in government regulations. Coase argues that in perfect competition with laissez faire, govt regulation is not needed. Instead bargaining between the polluters and their victims can lead to an optimal situation. But this pre supposes equality in bargaining, and does not take note of ecological consequences of pollution.
Market failure to take note of environmental impacts of economic activity. Why environmental effects are not included in perfect markets. Concept of public goods, externalities. Role of government.
In economics, the theory of the second best concerns the situation when one or more optimality conditions cannot be satisfied.
The economists Richard Lipsey and Kelvin Lancaster showed in 1956, that if one optimality condition in an economic model cannot be satisfied, it is possible that the next-best solution involves changing other variables away from the values that would otherwise be optimal.
Politically, the theory implies that if it is infeasible to remove a particular market distortion, introducing a second (or more) market distortion may partially counteract the first, and lead to a more efficient outcome.
Market failure to take note of environmental impacts of economic activity. Why environmental effects are not included in perfect markets. Concept of public goods, externalities. Role of government.
In economics, the theory of the second best concerns the situation when one or more optimality conditions cannot be satisfied.
The economists Richard Lipsey and Kelvin Lancaster showed in 1956, that if one optimality condition in an economic model cannot be satisfied, it is possible that the next-best solution involves changing other variables away from the values that would otherwise be optimal.
Politically, the theory implies that if it is infeasible to remove a particular market distortion, introducing a second (or more) market distortion may partially counteract the first, and lead to a more efficient outcome.
Polluters have to pay for the environmental damages that they create. Different methods to internalise the external costs of pollution are discussed here.
What externalities are and why they can lead to inefficiency and.docxphilipnelson29183
What externalities are and why they can lead to inefficiency and government intervention in the market
The difference among negative, positive, and network externalities
The importance of the Coase theorem, which explains how private individuals can sometimes remedy externalities
Why some government policies to deal with externalities, like emissions taxes, tradable emissionspermits, or Pigouviansubsidies, are efficient, and others, like environmental standards, are not
What makes network externalities an important feature of high–tech industries
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Active Learning
What you will learn in this chapter
1
EXTERNALITIES
Externalities (spillovers): the impact on third parties of a transaction between others.
If fracking pollutes drinking water sources, it is an external cost (“negative externality”).
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2
Image credit: Associated Press, MCT via Getty Images
The extra safety your neighbor might have because everyone else in the area has purchased burglar alarms is a(n):
private cost.
external cost.
private benefit.
external benefit.
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LEARN BY DOING: PRACTICE QUESTION
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3
EXTERNALITIES
Examples of external costs:
air and water pollution
texting while driving
chemical runoff that affects fish stocks
Examples of external benefits:
education
beehives next to almond orchards
preserved farmland
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All image credits courtesy of Morgue File and/or FreeImages.com unless otherwise specified
4
FOR INQUIRING MINDS: TEXTING
1 in 4 accidents (250,000 per year) are caused by cell phone use (National Safety Council, 2012)
43 states have banned it… because of the negative (fatal) externalities.
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Image: Steve Debenport/Getty Images
5
IS THE MARKET ALWAYS EFFICIENT?
Market failure: free-market equilibrium not providing the socially optimal amount of a good.
Left to itself, a market economy will typically generate too much pollution because polluters have no incentive to take into account the costs they impose on others.
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All image credits courtesy of Morgue File and/or FreeImages.com unless otherwise specified
6
COSTS AND BENEFITS OF POLLUTION
The marginal social cost of pollution is the additional cost imposed on society as a whole by an additional unit of pollution.
Acid rain, smog, contaminated water, etc.
The marginal social benefit of pollution is the additional gain to society as a whole from an additional unit of pollution.
Goods and services, jobs, etc.
The socially optimal quantity of pollution is the quantity society would choose if all costs and benefits were fully accounted for.
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7
SO HOW DO YOU MEASURE THE MARGINAL SOCIAL COST OF POLLUTION?
It’s the sum of the willingness to pay among all members of society to avoid that unit of pollution.
It may be hard to estimate, so society often underestimates it.
Legal economics necessary in curriculumM S Siddiqui
An academic course that blends expertise in law and economics enables lawyers to have an impact on a wide range of issues related to law, business, and finance. Judges and practitioners increasingly rely on economic reasoning to resolve legal disputes.
In some areas of legal practice-especially Contracts, Competition Law, tax law, bankruptcy, corporate and securities law, and other fields of economic law-economic reasoning is often central to the focus of legal arguments, and it continues to grow in importance in many other seemingly non-economic fields, such as environmental law, intellectual property law, consumer's protection law, Tort and more.
WINDING UP of COMPANY, Modes of DissolutionKHURRAMWALI
Winding up, also known as liquidation, refers to the legal and financial process of dissolving a company. It involves ceasing operations, selling assets, settling debts, and ultimately removing the company from the official business registry.
Here's a breakdown of the key aspects of winding up:
Reasons for Winding Up:
Insolvency: This is the most common reason, where the company cannot pay its debts. Creditors may initiate a compulsory winding up to recover their dues.
Voluntary Closure: The owners may decide to close the company due to reasons like reaching business goals, facing losses, or merging with another company.
Deadlock: If shareholders or directors cannot agree on how to run the company, a court may order a winding up.
Types of Winding Up:
Voluntary Winding Up: This is initiated by the company's shareholders through a resolution passed by a majority vote. There are two main types:
Members' Voluntary Winding Up: The company is solvent (has enough assets to pay off its debts) and shareholders will receive any remaining assets after debts are settled.
Creditors' Voluntary Winding Up: The company is insolvent and creditors will be prioritized in receiving payment from the sale of assets.
Compulsory Winding Up: This is initiated by a court order, typically at the request of creditors, government agencies, or even by the company itself if it's insolvent.
Process of Winding Up:
Appointment of Liquidator: A qualified professional is appointed to oversee the winding-up process. They are responsible for selling assets, paying off debts, and distributing any remaining funds.
Cease Trading: The company stops its regular business operations.
Notification of Creditors: Creditors are informed about the winding up and invited to submit their claims.
Sale of Assets: The company's assets are sold to generate cash to pay off creditors.
Payment of Debts: Creditors are paid according to a set order of priority, with secured creditors receiving payment before unsecured creditors.
Distribution to Shareholders: If there are any remaining funds after all debts are settled, they are distributed to shareholders according to their ownership stake.
Dissolution: Once all claims are settled and distributions made, the company is officially dissolved and removed from the business register.
Impact of Winding Up:
Employees: Employees will likely lose their jobs during the winding-up process.
Creditors: Creditors may not recover their debts in full, especially if the company is insolvent.
Shareholders: Shareholders may not receive any payout if the company's debts exceed its assets.
Winding up is a complex legal and financial process that can have significant consequences for all parties involved. It's important to seek professional legal and financial advice when considering winding up a company.
ALL EYES ON RAFAH BUT WHY Explain more.pdf46adnanshahzad
All eyes on Rafah: But why?. The Rafah border crossing, a crucial point between Egypt and the Gaza Strip, often finds itself at the center of global attention. As we explore the significance of Rafah, we’ll uncover why all eyes are on Rafah and the complexities surrounding this pivotal region.
INTRODUCTION
What makes Rafah so significant that it captures global attention? The phrase ‘All eyes are on Rafah’ resonates not just with those in the region but with people worldwide who recognize its strategic, humanitarian, and political importance. In this guide, we will delve into the factors that make Rafah a focal point for international interest, examining its historical context, humanitarian challenges, and political dimensions.
Car Accident Injury Do I Have a Case....Knowyourright
Every year, thousands of Minnesotans are injured in car accidents. These injuries can be severe – even life-changing. Under Minnesota law, you can pursue compensation through a personal injury lawsuit.
RIGHTS OF VICTIM EDITED PRESENTATION(SAIF JAVED).pptxOmGod1
Victims of crime have a range of rights designed to ensure their protection, support, and participation in the justice system. These rights include the right to be treated with dignity and respect, the right to be informed about the progress of their case, and the right to be heard during legal proceedings. Victims are entitled to protection from intimidation and harm, access to support services such as counseling and medical care, and the right to restitution from the offender. Additionally, many jurisdictions provide victims with the right to participate in parole hearings and the right to privacy to protect their personal information from public disclosure. These rights aim to acknowledge the impact of crime on victims and to provide them with the necessary resources and involvement in the judicial process.
Responsibilities of the office bearers while registering multi-state cooperat...Finlaw Consultancy Pvt Ltd
Introduction-
The process of register multi-state cooperative society in India is governed by the Multi-State Co-operative Societies Act, 2002. This process requires the office bearers to undertake several crucial responsibilities to ensure compliance with legal and regulatory frameworks. The key office bearers typically include the President, Secretary, and Treasurer, along with other elected members of the managing committee. Their responsibilities encompass administrative, legal, and financial duties essential for the successful registration and operation of the society.
A "File Trademark" is a legal term referring to the registration of a unique symbol, logo, or name used to identify and distinguish products or services. This process provides legal protection, granting exclusive rights to the trademark owner, and helps prevent unauthorized use by competitors.
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PRECEDENT AS A SOURCE OF LAW (SAIF JAVED).pptxOmGod1
Precedent, or stare decisis, is a cornerstone of common law systems where past judicial decisions guide future cases, ensuring consistency and predictability in the legal system. Binding precedents from higher courts must be followed by lower courts, while persuasive precedents may influence but are not obligatory. This principle promotes fairness and efficiency, allowing for the evolution of the law as higher courts can overrule outdated decisions. Despite criticisms of rigidity and complexity, precedent ensures similar cases are treated alike, balancing stability with flexibility in judicial decision-making.
DNA Testing in Civil and Criminal Matters.pptxpatrons legal
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Military Commissions details LtCol Thomas Jasper as Detailed Defense CounselThomas (Tom) Jasper
Military Commissions Trial Judiciary, Guantanamo Bay, Cuba. Notice of the Chief Defense Counsel's detailing of LtCol Thomas F. Jasper, Jr. USMC, as Detailed Defense Counsel for Abd Al Hadi Al-Iraqi on 6 August 2014 in the case of United States v. Hadi al Iraqi (10026)
2. RONALD HARRY COASE
(1910 – 2013) WAS A BRITISH
ECONOMIST AND AUTHOR.
HE WAS THE PROFESSOR OF
ECONOMICS AT
THE UNIVERSITY OF
CHICAGO LAW SCHOOL. HE
RECEIVED THE NOBEL
MEMORIAL PRIZE IN
ECONOMIC SCIENCES IN 1991
FOR HIS ARTICLE ON “THE
NATURE OF THE FIRM”.
3. Emergence of coase theory: Pigouvian
theory
Over the years, the problem of how to internalize of
external effects is dominated by Pigouvian theory. To
some extent, Coase theory is developed through the
criticisim of Pigouvian theory.
In a very simple way, Pigouvian solution prefer to use
government intervention to solve externality while
Coasean solution prefer to use market method to solve
externality.
4. Cont.
Pigou believes that government should impose taxes and subsidies,
the externality problem could be internalized. And such policy is
known as Pigouvian solution, and the tax is called Pigouvian tax.
Pigovian solution has been widely used. In the field of infrastructure,
the policy is who invest who benefits; in the environmental protection,
the policy is who pollute who pay(a.k.a Polluter Pays Principle PPP).
Whereas according to Coase theorem, If the transaction cost is zero,
no matter how the initial definition of property rights is, optimal
allocation of resources can be achieved through market.
Coasian solution shows that even there is a market failure it doesn't
automatically means we should use government intervention.
5. THE PROBLEM OF SOCIAL COST
(COASE THEOREM)
➢ The Coase Theorem addresses the question of how
effectively private markets can deal with externalities. In
essence, it states that private parties can solve the problem
of externalities on their own, if they can bargain over the
allocation of resources without cost.
➢ Theorem states that where there is a conflict of property
rights, the involved parties can bargain or negotiate terms
that are more beneficial to both parties than the outcome of
any assigned property rights.
6. CONT.
➢ The theorem also asserts that in order for this to occur,
bargaining must be costless; if there are costs associated
with bargaining, such as those relating to meetings or
enforcement, it affects the outcome.
➢ With costless market transactions the decision of the court
concerning liability for damage would be without effect on
the allocation of resources.
7. ASSUMPTIONS OF THEOREM
➢ Equal status of bargaining partners
➢ No transaction cost
➢ No income effect
➢ No government interference
8. EXAMPLE-1
➢ If a factory pollutes the river, then fishermen are
affected.
➢ Their income is reduced or their health suffers this is
external cost of pollution.
➢ Lets suppose if factory has right to pollute- in such a
situation the fishermen needs to pay to the industry to
reduce pollution or may move to other place.
9. And if fishermen have right to clean river then the factory
owners needs to compensate the damage caused or can
move to other place and all of which is not economical.
Therefore according to coase this can be achieved through
bargaining by both the parties, without government
regulation.
Coase shows that ‘least cost’ method can lead to
optimum solution.
10.
11. EQUILIBRIUM
➢ In this figure MD is Marginal environmental Damage. It
increases as pollution increases.
➢ Its cost is borne by the fishermen or other victims in terms
of income or health.
➢ MCA = Marginal Abatement Cost. If the firm has to
reduce pollution, it has to spend more on pollution control
measures.
➢ Optimum level of pollution is at X0, where MD=MCA
➢ But if actual pollution is X1 then MCA > MD. The firm
will bargain to reduce the pollution upto X0, paying
compensation to victims= ABE
12. ➢ If actual pollution is X2 then the cost of damage to victim is
GX2.
➢ To make firm reduce pollution up to X0, cost to firm will be
EGH. Victims will pay this amount to firm to reduce
pollution to X0.
➢ Thus pollution level could be optimum through bargaining
by both the parties. Either victim should pay to polluters to
reduce pollution or polluters should pay to victims as
compensation.
13. Case- Sturges vs. Bridgman, 11 Ch.D.852(1879)
In this case a confectioner used machinery at a location for
more than 30 years. A doctor than came to occupy
neighbouring premises. The confectioners machinery caused
the doctor no harm until 8 years after he built a consulting
room at the end of his garden right against the confectioners
kitchen it was then found that the noise and vibration caused
by the confectioners machinery made it difficult for the doctor
to use his consulting room.
14. Cont.
The doctor therefore bought a legal action to force the
confectioner to stop using his machinery. The court's decision
established that the doctor had the right to prevent the
confectioner from using his machinery.
But of course it would have been possible to modify the
arrangements envisaged in the legal ruling by the means of
bargain between the parties.