Concept

Externalities

Property: Volume 1 Christian Turner Assistant Professor of Law University of Georgia School of Law eLangdell® Press 2012 / Problems

"Two externalities that arise from an individual’s decision to drive across town to visit a friend include pollution and congestion, both of which are marginally increased by one’s driving. We generally do not bear, individually, the full cost of either. The risk of injury to others may also not be part of the private cost-benefit calculation that goes into driving, and the cost reflected in insurance premiums might not reflect the true cost of the risk imposed on others.\n\nTo solve this problem, we can look for ways to internalize these externalities. This generally means some kind of tax, such as a toll, surcharge, or fee, or possibly regulation. We may choose a gas tax meant to charge an individual for the harm caused by pollution, or use a toll system meant to charge an individual for his or her marginal contribution to road congestion."

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Externalities | Property: Volume 1 Christian Turner Assistant Professor of Law University of Georgia School of Law eLangdell® Press 2012 | Bifalgorithm | Bifalgorithm