An externality is a cost or subsidy which comes from production and falls on anyone but the producer. It can also be a cost or subsidy that comes from consumption and falls on someone apart from the consumer. A negative externality is one that inflicts external cost.
Negative production externalities are when someone other than the producer of that occurrence is being affected. For instance, clearing forests destroys the wildlife habitat and reduces the amount of carbon dioxide that plants naturally release into the atmosphere, which creates an enduring affect on temperature. Another example could be talking during a lecture in class. While someone may be having a conversation during a lecture, those who surround that person may become distracted from the lecture and experience a hard time comprehending or even listening to their professor. Examples of negative consumption externalities include smoking in restricted areas. Smoking affects people’s health and may be unpleasant to a person who is sensitive to the fumes. Certain restaurants, bars/clubs, and airlines ban smoking in an attempt to prevent negative consumption externalities, but on the other hand, this creates a negative consumption externality on those who prefer to smoke or take pleasure in while they are eating, drinking or partying, or flying.
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Smoking bans create a negative external cost on smokers who would prefer to enjoy the consumption of tobacco while dining or taking a plane trip. Restaurants are trying to cater to smokers by building outdoor extensions where they can eat and smoke. Some bars and clubs have decided not to serve food so that smoking will still be allowed inside. Smoking is banned only banned in bars and clubs that make more than 10% of their total revenue in food sales.
ReplyDeleteWe are surrounded by negative externalities daily. By walking outside, the air has pollution in it from cars and industrial emissions and we do not have a choice whether or not we want to inhale those fumes. It helps that smoking is banned from resturants, but that only helps a little. We will never be able to control negative externalities. We need more positive externalities to weigh out the negative so we can get our economy under control!
ReplyDeleteI think you're right about the smoking thing. Im not a smoker, but it does seem like banning smoking all across the board isnt fair to smokers. Isnt that just like economics too? Somebody is always going to lose...
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