What are the changes in the thinking and countermeasures of economics in dealing with externalities

The basic idea of addressing externalities is to internalize externalities. That is, the social benefits or social costs generated by the economic activities of economic agents are converted into private benefits or private costs through institutional arrangements, which is the transformation of technical externalities into monetary externalities, and to a certain extent, the realization of monetary transfers that did not exist in the first place.

The specific measures are:

1. Taxation and subsidies.

Any kind of economic activity will have an external impact, for example, automobile transportation will inevitably produce exhaust gases to pollute the environment, and afforestation and forestry will have the result of improving the environment. This is the externality of the economy. If the former is a "negative externality", the latter should be called a "positive externality".

Externalities distort the relationship between the costs and benefits of market entities, which will lead to market inefficiency or even failure, while if negative externalities cannot be contained, the environment on which economic development depends will continue to deteriorate, and eventually the economy will lose the conditions for development.

Therefore, negative externalities can be taxed and positives subsidized. Taxation can inhibit economic activity that generates negative externalities; Subsidies can incentivize economic activity that generates positive externalities. This tax, which is used to eliminate negative externalities, is called the Pigovian tax

tax).2. Coase's theorem.

If there is a division of property rights, when transaction costs are low and the number of participants is small, people can negotiate privately to resolve externalities. As mentioned above, in the case of dog ownership, either the dog owner compensates the neighbor to accept the dog, or the neighbor gives the dog owner a certain fee to stop owning the dog.

Extended Materials. The external economy is not the external economy.

Most economics textbooks say that externalities can be divided into external economy (or positive external economic effects, positive externalities) and external uneconomics (or negative external economic effects, negative externalities).

The external economy is the phenomenon in which the production or consumption of some people benefits others without being able to charge the latter; External diseconomy is a phenomenon in which the production or consumption of some people hurts others, and the former is unable to compensate for the latter. For example, the beauty of a private garden brings beauty to a passer-by, but he does not have to pay for it, so that the owner of the private garden has an external economic effect on the passer-by. Another example is when the volume of the next-door neighbor's stereo is turned on too much and affects my sleep, and at this time, the next-door neighbor brings me an external uneconomical effect.

In the process of economic development, some ideas will change with the change of the times.

The thinking and response to externalities in the development process of economics will change according to the development of the political situation at the time.

In the course of the development of economics, there has been a great deal of change in cooperation and response to externalities, and it has been very good.

What are the changes in the thinking and countermeasures of economics in dealing with external misfortunes in the process of development? It is a question of economics, and its development has changed in its thinking and pointers. It's very big.

In the development of economics, the idea of dealing with externalities should be to transform external hostile forces into our own use.

Characteristics of externalities:

1 Behavioral.

Behavioral means that externalities are caused by the economic behavior (economic activity) of economic agents.

2 Marketability.

It mainly refers to the non-market under general conditions and the marketability under specific conditions.

3 External invasiveness.

The so-called external aggression means that the externality is an externally invasive, imposed influence, that is, the impact on people who are not involved in decision-making or who are not fully involved in decision-making.

4 Impact.

That is, one party (influencer) must have a certain influence on another person (the influenced), not only must there be an influence, but this influence must have a certain (positive or negative) welfare significance.

5 Non-Recoverable.

This refers to the non-recourse (or difficulty) of indemnity. This characteristic refers to the fact that the externalities generally cannot be traced back to the individual, especially the injured party is unable to recover its injured person and obtain compensation, and its root cause lies in the non-market nature of the general conditions and the marketability of the specific conditions.

6 Concomitant.

Externalities should be intentional or unintentional concomitant effects, while primordial, premeditated effects are not externalities. That is, externalities are "appendages" of economic activity.

7 Reciprocity.

The characteristic of reciprocity refers to the interdependence of the relationship between the agent who produces the external effect and the agent who receives the external effect.

Addressing externalities:

The main way to address externalities is to internalize them. There are two ways to solve the problem of externalities of public goods: the first method and the market method.

Means 1: Strengthen policy control and strengthen regulatory functions;

Second, use fiscal means to internalize externalities;

Market means 1: improve the market trading system and promote the improvement of economic efficiency;

Market Instrument 2: The provision of public goods introduces competition.

The characteristics of externalities are: externalities are independent of the market mechanism and have concomitant nature; externalities necessarily harm or enhance the welfare of others; The existence of externalities is "mandatory"; Externalities cannot be completely eliminated. Measures to address externalities include:

taxes and subsidies; "internalize" externalities through merging; Clarity of property rights (Coase's theorem).

Externalities refer to the non-market properties imposed by the economic activities of one economic unit on other economic units.

Extrinsic, also known as external economic influence, refers to the "non-market" influence exerted by the economic activities of one economic unit on other economic units.

The effect of externality on economic efficiency lies in the fact that it discretes the quantity provided by private individuals from the quantity required by society. This can be explained by private versus social costs and their private and social benefits.

If an activity has a negative external economic impact, then the activity imposes a positive cost on other economic units, so that the social cost is greater than the private cost; Conversely, in the presence of positive external influences, the social costs are smaller than the private costs.

Or: if the private gains are greater than the social gains, the economic unit exerts a negative external influence; If the private benefits are less than the social gains, then the economic unit exerts a positive external influence. ）

If the firm has a negative external economic impact on other economic units, the optimal output of the private firm is greater than the optimal output of the society; If the firm has a positive external influence on other economic units, the optimal output of the private firm is less than the optimal output of society.

Corrective externality policies are guided by the internalization of external economic influences, providing policymakers with an incentive to measure the external effects of their decisions. These policies are mainly as follows:

1) Taxes and subsidies, i.e., taxes that are levied on firms that exert negative external economic impact that are exactly equal to the marginal external costs, and subsidies that are given to firms that have a positive external economic impact equal to the marginal external benefits.

2) Business combination, i.e., the merger of economic units that impose and accept external costs or benefits.

3) Clarify property rights and negotiate. According to Coase's theorem, there is no need to directly regulate external economic influences, as long as the property rights of both parties who explicitly impose and accept external costs or benefits can be resolved through market negotiations.

The imperfection of the market mechanism is the main cause of the externalities of economic activities. From the perspective of technological externalities, because there is no clear definition of property rights in certain goods, there is no market for these goods in economic activities, although they have value. According to Coase's theory of property rights transactions, the unclear definition of property rights is the root cause of the externalities of economic activities.

In the transaction process of economic agents, the main reason for the externalities is that the property rights are unclear or cannot be defined. Unclear definition of property rights means that at present, due to institutional or artificial reasons, the cost of property rights definition exceeds the cost of clear property rights, and the definition of property rights is uneconomical; The indefinability of property rights refers to the lack of internal motivation and necessary means for clear property rights due to the unclear regional spatial ownership of certain elements of economic activities and labor objects. Unclear property rights in rivers can lead to arbitrary discharge of waste by economic agents that endanger downstream watersheds; It is difficult to define the spatial ownership of air, so it is difficult for regional economic agents to consider air pollution when carrying out economic activities.

From the perspective of capital externalities, the economic activities of market entities affect the welfare level of other entities through the market system. The two forces influencing this process are the local market size effect and the ** index effect, the latter being the main force generating capital externalities. **The exponential effect depends on the level of commodity barriers, factor mobility, and the strength of linkages between industries, while the level of commodity barriers and factor liquidity represent the state of market integration.

Under the condition of a high degree of market integration, commodities and factors of production can flow freely between regions, and a certain behavior of an economic subject on the top will inevitably be transmitted to other regions quickly and affect the welfare status of other regions. In the state of disorderly competition, unclear division of labor and lack of cooperation between regions, the flow of factors and commodities between regions will be blind and chaotic due to the lack of necessary filtering mechanisms, and the externalities of capital, especially the negative externalities of funds, will be more obvious. Although the closure of regional markets and the restriction of the flow of commodities and factors can reduce the negative externalities of capital to a certain extent, they are contrary to the inherent requirements of the modern market.

Therefore, strengthening mutual cooperation among economies and promoting coordinated development is the reasonable way to reduce the externality of capital under the conditions of modern market economy. In fact, as long as there is competition in the market, as long as the demand curve is inclined to the lower right, the economic activities of the subject with clear property rights will produce capital externalities; Moreover, the more competition there is, the greater the funding externalities. Unclear property rights are the reason for the existence of technological externalities, and even if property rights are clear, capital externalities may still exist, which is as eternal as spatial distance.

In general, the methods or policies to eliminate externalities through intervention include the use of taxes and subsidies, or the internalization of external influences through the merger of enterprises.

First of all, taxes and subsidies can be used. For those enterprises that export negative externalities, such as enterprises with serious pollution, levy appropriate taxes, the amount of which should be equal to the cost of pollution control, so that the private cost of the enterprise is equal to the social cost, and the production cost and product of the enterprise will be increased accordingly, which will not only inhibit the effective demand of the market for the output of the enterprise, but also make the production of the enterprise shrink, so as to eventually guide the transfer of resources to other uses or more efficient enterprises, so that the resources can be used more effectively. For those enterprises with positive externalities, financial subsidies should be given so that their private benefits are equal to social benefits, so that enterprises can be encouraged to increase output to achieve optimal allocation of resources.

Second, externalities can also be "internalized" by merging related firms. For example, if company A is the enterprise that exports negative externalities and company B is its victim, or if company A is the enterprise that exports positive externalities and company B is the beneficiary of the free, in both cases, if the two companies A and B are merged, the negative externalities or positive externalities will disappear.

Third, the other most important way to eliminate externalities is to clarify property rights. Coase, the founder of property rights economics, believes that property rights do not refer to ownership, and only when at least two economic actors, or ownership subjects, have transactions, property rights will arise, therefore, property rights are different from ownership, but related to ownership, property rights involve the relationship between two types of ownership, that is, the relationship between equal ownership subjects. American property rights economist Demsetz believes that property rights are to define how people benefit and how they are damaged, so one party must provide compensation to the other party to change the actions people take, therefore, property rights refer to the rights that benefit or damage oneself or others, and are a social tool to define the rights and responsibilities between the subjects of the transaction.

In most cases, the existence of externalities and the misallocation of resources are due to the lack of clarity in the definition of property rights. Externalities can occur if there is no clear definition of whether a chemical plant has the right to pollute a nearby river and thus cause harm to the production of nearby farmers, and whether a nearby farmer has the right to be free from a chemical plant. Conversely, if property rights, i.e., the right to benefit or damage, and the right of one party to compensate the other, are clear, externalities may not occur.

Therefore, clarifying property rights should be the most important measure to eliminate externalities.

Answer: Zheng or the Bureau] :d

1. This question examines the method of giving in to the elimination of externalities in market intervention.

2. Original textbook:

1) Traditional methods of eliminating externalities, including the use of taxes and subsidies, the internalization of externalities by merging related firms, etc.: First, taxes can be used to generate external uneconomic enterprises, and for those enterprises with external economic advantages, financial subsidies should be given so that their private benefits are equal to social benefits. In this way, enterprises can be encouraged to increase production in order to achieve the optimal allocation of resources.

Second, externalities can also be "internalized" by merging related firms.

2) With the emergence and development of property rights theory, clarifying and defining property rights has become an important way to eliminate externalities. If the property rights, i.e., the right to benefit or damage, and the right of compensation from one party to the other, were clear, externalities might not occur.