The Vanguard of the Revolution - by Trevor Chow

This is an activity which harms third-parties who are not part of the transaction. If a battery factory leaks toxins into a river and poisons residents nearby, the harms are borne neither by the factory owner selling batteries nor those purchasing batteries. Thus they will not be reflected in the market price, causing an oversupply of batteries and of water pollution. When externalities were first formalised in the 1920s, economists thought that states should impose a tax onto batteries, equivalent to the harms caused by their production. Of course, it is nigh-impossible to accurately measure the dollar value of those harms from pollution! That was until Ronald Coase came up with the Coase Theorem in his 1960 paper, “The Problem of Social Cost”. Loosely, it says the following: If there are clear property rights and low transaction costs, an efficient outcome will arise by bargaining, regardless of the initial allocation of property rights. Of course, this just begs the question. Extern

This is an activity which harms third-parties who are not part of the transaction. If a battery factory leaks toxins into a river and poisons residents nearby, the harms are borne neither by the factory owner selling batteries nor those purchasing batteries. Thus they will not be reflected in the market price, causing an oversupply of batteries and of water pollution. When externalities were first formalised in the 1920s, economists thought that states should impose a tax onto batteries, equivalent to the harms caused by their production. Of course, it is nigh-impossible to accurately measure