Externalities

Definitions

100

A positive or negative effect that a market transaction imposes on a third party

Externality

200

The utility level of one individual within society

Private welfare

300

Professor Post's favorite animal

Bears

400

The summed utility levels of all individuals within a society

Social Welfare

500

The difference between the social benefit and the social cost of production in a market

Social Surplus

Definitions 2

100

A subsidy or tax designed to internalize an externality by altering private costs and private benefits

Pigouvian Tax/Subsidy

200

Resources will be used efficiently to maximize social welfare, even in the face of externalities, provided that property rights are well-defined, and transaction/bargaining costs are sufficiently low

The Coase Theorem

300

The forgone social surplus due to a market inefficiency such as an externality

Social Loss
Deadweight Loss

400

The author of The Wealth of Nations and the father of modern economics

Adam Smith

500

A trade where both parties improve their status

Pareto-improving

Obesity

100

An example of this, taxes on SSB are designed to internalize the social costs of obesity

Pigouvian Tax

200

This popular and critical meal program has been found to increase the risk of obesity

National School Lunch Program

300

This popular tax credit for low-income individuals may increase weight for women

Earned Income Tax Credit

400

This popular education program may reduce the risk of obesity

Head Start

500

State-level unemployment may be negatively associated with this

Obesity

Smoking & Drinking

100

For each additional ounce of this substance consumed, life expectancy decreases 20 minutes

Alcohol

200

For each pack of this consumed, life expectancy decreases 137 minutes

Cigarettes

300

An example of this, taxes on alcohol and tobacco are designed to internalize the social costs of liver and lung diseases

Pigouvian tax

400

An argument to why an excise tax on cigarettes would be effective, 20-25% of adults do not know this

Risks of Smoking

500

An example of a Pigouvian tax related to driving under the influence

Ticket, Suspension of License, Jail

Vaccines

100

The secondhand immunity that accrues to nonvaccinated people when other people are vaccinated

Her Immunity

200

Price of vaccine, possible side effects, painful shots

Private costs of vaccination

300

Examples of this, free or subsidized vaccinations are designed to internalize the social costs of being unvaccinated

Pigouvian Subsidy

400

1,282 cases of this vaccine-preventable disease were reported in 2019, the greatest number of cases since 1992

Measles

500

Approximately 190 million Americans (58%) are vaccinated against this infectious disease

COVID-19