Category: Externalities and Public Goods

After Life — Chip Externalities (explicit language)

Tony joins his colleagues for lunch at a local pub to discuss potential leads for their newspaper, but he’s disturbed by a gentleman loudly munching on chips behind him. The man appears to be ignorant of the external costs he’s imposing on those around him and is focused on only his own satisfaction.

When people are unaware of the external costs they are imposing on others, they tend to overconsume, literally. Since there aren’t clear property rights, it’s not clear who should make the determination of appropriate volume. Tony could pay the man to stop eating his chips, but Tony may argue that the man should have to pay for the right to eat his chips so loudly. It’s harder to reach a solution without clearly defined property rights.

Thanks to Sheena Murray for introducing me to this show. She submitted a different clip from the show, but I looked up the wrong episode and happened to find this clip instead.

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Friends — The One With All the Candy

 

Monica decides she wants to makes candy for the neighbors even in an attempt to get to know them better (or to liked?) She decides to place the candy in a basket on her door so that anyone can take a piece, but a tragedy of the commons ensues. Her neighbors are taking more than their “share” of the candy and are bothering her throughout the day to get more candy from her. When the commons has been exhausted, the neighbors form a mob.

Thanks to Dawn Renninger for the clip recommendation!

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Erin Brockovich — Negotiating Damages

There appears to be a coverup of contamination of the local water supply by PG&E, but the impacts are becoming more visible. In this scene, Ed Masry meets with a PG&E lawyer to “negotiate” a settlement for damages causes by the contamination. While PG&E may not have believe their dumping was causing externalities, it appears that they may have imposed serious external costs on the region. One of the concerns of litigation of this sort involves determining the appropriate value of the reduced quality of life resulting from these external costs.

Thanks to Dawn Renninger for the clip suggestion!

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Mumbai Police — A Solution for Noise Pollution

Mumbai drivers are apparently notorious for honking, even when the light is red and people can’t move. The Mumbai police decided to incentivize drivers in order to reduce some of the noise pollution in the city. The police installed noise meters and if the decibel level reaches a certain threshold, the timer on the lights resets. A message flashes to let drivers know that the more they honk, the longer they wait!

Another fun policy intervention occurred in Europe to help drivers slow down.

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Have Gun – Will Travel — Bitter Wine

 

Paladin is hired to settle an issue between a vineyard owner and a neighboring oilman. The smoke and runoff from the oil well are damaging the grapes of the award-winning vintner. This is a classic case of externalities and the Coase Theorem would suggest the two could meet and solve the problem on their own (if there were low transaction costs), but the Coase Theorem wasn’t written about until two years AFTER this episode aired.

Check out this Econlib post for more discussion. This clip, and a forthcoming working paper, was presented at the 2019 Southern Economics Association Annual Meetings by Jon Murphy and John Schuler.

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Blackish — Castle Neighbors

 

This opening cartoon depicts Dre dutifully maintaining his castle and describing the lengths men go to in order to protect their castle. Unfortunately, we can’t always control what neighbor’s do with their castle and their decision to throw parties and disturb us is (seemingly) out of our control. The Coase Theorem would argue that so long as transaction costs are low, people should be able to bargain and sort out external costs imposed by private actions. The insinuation by Dre in this scene is that the transaction costs may be just a bit too high.

Clip recommended by James Tierney:

 

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Big Bang Theory — An (Un)Permitted Deck

 

Howard and Bernadette are bothered by their neighbor’s (Andy) new flood lights, which appears to look out over their backyard and right into the hot tub they have built. Andy doesn’t see the problem because his flood lights are in his backyard and provide him some sense of security, but they are a nuisance to Howard and Bernadette.

Instead of talking to their neighbors directly, like the Coase Theory would suggest, they head to the city zoning office to try and report the issue in the hopes that he has violated some city zoning ordinance. When they realize that will take too much time, they try to get Sheldon’s help, but Sheldon is cautious because Bernadette and Howard didn’t get permission to build their backyard deck, nor renovate their shower.

In Howard and Bernadette’s mind, government regulation should only be used for externalities. Their deck and bathroom aren’t affecting third parties so they don’t see the need to have them approved.

 

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The Good Place — Externalities & Unintended Consequences

 

Things seem off in The Good Place, but it turns out that the as the world becomes more complicated, seemingly identical actions (like giving flowers) can have unintended consequences that most people don’t realize. Our private actions can have social costs that we’re unaware of and would probably try to avoid if we were fully informed of their costs.

Thanks to Kalina Staub (Twitter) for the clip!

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Curb Your Enthusiasm — Unwritten Rules

Larry David teaches Christian Slater the social etiquette surrounding overconsumption of  hors d’oeuvres a party. To start, Slater’s over consumption represents the individual incentives surrounding common resources. Ostrom’s Noble Prize in Economics explored the way social conventions, which David explains, can solve overconsumption issues even when laws aren’t in place.

Thanks to Greg Caskey for recommending it to the #TeachEcon stream on Twitter.

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