Wednesday, March 23, 2016

Hilarity in Economic Education: Externalities

I recently rediscovered this video on the basics of externalities. It's unique in that it's 1) hilarious and 2) includes some important but not often discussed insights about ways in which we can deal with negative externalities.

I've discussed some problems with the standard textbook treatment of negative externalities several times on Farmer Hayek (e.g. here and here), but I haven't yet shared this quote from A.C. Pigou found in the video:
It is not sufficient to contrast the imperfect adjustments of unfettered enterprise with the best adjustment that economists in their studies can imagine, for we cannot expect that any state authority will attain, or even wholeheartedly seek that ideal. Such authorities are liable alike to ignorance, to sectional pressure, and to personal corruption by private interests. A loud-voiced part of their constituents, if organized for votes, may easily outweigh the whole.
Pigou's comment is certainly applicable to many of the debates we are having about modern agriculture's impact on society.

Here's the video!

Video link

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