The importance of externalities free essay sample

The Importance of Externalities Our federal, state, and local governments are challenged each day with producing specific incentives that help boost growth in our economy, help protect our environment, and the safety of our well being. These challenges can often be achieved by the government stepping in and dealing with externalities. Externalities are effects on those not involved in the market but have can have a significant impact on everyone. When an externality the gap between the private cost and the social ost of some behavior is large, individuals have an incentive to do things that make them better off at the expense of others. (Wheelan, p. 55) There are positive and negative externalities. When negative externalities are present, taxes can actually make markets more efficient for society because it supplies the funds necessary to handle the issue(s). When positive externalities are present, subsidies can make markets more efficient for society. We will write a custom essay sample on The importance of externalities or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Some activities possess both positive and negative externalities which sometimes council each other out so there isnt much that can be one. Dealing with Negative externalities has become increasing important as they shape our future in not only our economy but also in our environment. Externalities are at the root of all kinds of policy issues, from the mundane to those that literally threaten the planet(Wheelan, p. 56) Most scientist would agree that one of the major issues that threatens the plant today is Global warming. Global warming is a difficult eternality to deal with because it is a Global problem not Just a regional problem, therefore in order to address this issue everyone must play by the same rules. A teel plant in Pennsylvania emits C02 that may one day cause tlooding in Bangladesh. (Meanwhile, acid rain caused by U. S. emissions is already killing Canadian forest. )(Wheelan, p. 58) This is Just one example of many that governments are work to try and find a solution. Positive externalities occur when an individuals behavior can have a positive impact on society for which he or she is not fully compensated(Wheelan, p. 8) A prime example of a positive externality that we see in our own neighbors. An older home sells that is in need of repairs and the new home owners spend thousands of dollars fixing the house to look new again. These improvements to their property will help the market value of their home. The improvements will also enhance the market value of neighbors property even though they did not bear any portion of the improvement costs or participate in the decision to improve this property. Some areas have adopted ways to revitalize run down areas by offering economic development incentives that help to pay for renovations. The county where I grew up in currently has historical areas that if purchased or renovated the economic development commission will reimburse up to 100% of the enovations. This is a wonderful program that helps to not only stimulate the economy in these areas but it also preserves history for many years to come. As a real estate broker in the state of Virginia I find this to be an important tool when trying to sell property. Therefore not only does this positive externality help the local market in this particular neighborhood but it also helps to create sales within a region which helps to stimulate the local economy. The examples above in positive and negative externalities help us to understand their importances which in many ases are used to boost growth in our economy, help protect our environment, and the safety of our well being. The bible speaks of the importance of mans role in protecting our environment. Then God said, Let us make man in our image, in our likeness, and let them rule over the fish of the sea and the birds of the air, over the livestock, over all the earth, and over all the creatures that move along the ground. (Genesis 1:26) Its important as Christian leaders that we pay attention to current legislation and vote in the right politicians to take care of the externalities that we need addressed to preserve the future for tomorrow.