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Externalities continued (Common access resources and threats to…

- - - - Legislation + regulation: Health and safety controls protect the buyer from purchasing inferior or dangerous g's + s's. However, Opportunity costs + hard to impose.
      - Licensure: Professionals need to have a license. However may restrict the amount of supply from professionals and create monopoly power
      - Provision of info:Nutrition info, quality of the service, info on health hazards etc. However, info collection is costly and hard and some info is impossible to provide (legal or medical knowledge)
  - - - Moral hazard
        
        Buyer of insurance acts differently after buying insurance. e.g. car insurance the buyer will be less careful after the purchase
        
        Strategies
        
        The seller of insurance will attempt to make the buyer pay a proportion of the damage = lowers the buyers risky behaviour
        
        Unequal effects on low-income v high-income buyers
      - Adverse selcection
        
        The buyer of health insurance knows more about his/her health than the provider = Under-allocation of health resources as sellers try to protect themselves
        
        Strategies
        
        Correction of under-allocation of resource by covering everyone to social health insurance or direct gov provision of healthcare = NHS for e.g.
        
        Opportunity cost of spending on healthcare
- - - - People make efforts to survive on low incomes thus, use all available resources whether sustainable or not. High population growth acts as a threat to the environment from developing areas
      - For instance, deforestation for agriculture or wood, soil degradation as farmers cannot afford inputs to maintain fertility...
    - - It created enormous negative externalities of production and consumption . These can be seen from overuse, depletion, degradation giving rise to external costs such as ozone layer depletion, climate change, acid rain, health issues etc.
  - - - There are many such as quotas,
    - - Or tech that reduces negative externalities. Both private and public funding is not enough
      - e.g. solar power, wind, biofuel and geothermal energy
    - - Taxes on CO2 from the use of fossil fuels. Incentive for firms to switch to alternatives due to the higher emitted the higher paid
      - e.g France, Denmark and Sweden imposed
    - - Set a max amount of pollutant that can be emitted by distributing permits to firms (passes) that they can pollute. If the firm needs more they can buy from another firm, if not they can sell
    - - Many countries subsidise fossil fuel production / consumption = lower costs for firms to use these other than sustainable alternatives. These should be eliminated
    - - Provided to firms or gov agencies that conduct R&D for the development of clean tech. This increases the supply of clean tech and decreases the price for consumers. While also reducing the size of the negative externality and and use of non-renewable aternatives.
    - - Negative externalities on environment require international collab. Ozone depletion or climate change was caused by all countries thus, everyone should find a solution -- e.g .Kyoto protocol