Externalities in Real Life

Global Warming is an example of negative externality.

BBC News: Noise pollution on the increase

BBC News: Schoolies week in Australia causes binge drinking worry

Externalities are costs (negative externalities) or benefits (positive externalities), which are not reflected in free market prices. For example, as a result of manufacturing of products, the CO2 levels in the atmosphere increase and therefore results in global warming. So global warming is an negative externality.

In the class, we have looked at the videos about real life externalities. In the videos above in the links, they reported the negative externalities caused by noice pollution and binge drinking.

In the first video, some teenagers were having a party at the house where the sound-proof system was poorly installed. As a result of this boisterous party, neighbors had to suffer a noise pollution. This is one of the negative externalities. The another is that the policemen had to go to the reporter’s house to find out what the problem is and go to problem-making teenager’s house for warning. Boisterous party of teenagers had negative externalities of upset neighbors and the time of the policemen. Some might say that it is policemen’s job to solve these kinds of problems, however, in the video over 300% of calls to police office increased because of the noise pollution. So, it has cost policemen’s time to solve other problems. So the policemen would not have time to stop other crimes from happening. Overall, teen’s noisy party has cost the society a lot, more than their upset neighbors.

In the second video, it reported that teenagers binge drank after their examination as a ceremony. Teenagers were having fun, however, it has cost the society some negative externalities. For example, policemen and volunteers were patrolled in order to prevent some teens from alcoholic poisoning. It has cost policemen’s and volunteer’s time and energy in keeping eye on these teens. Also, the teens probably littered and did not pick up the trash at the beach. This would also cost the local government money for employing people to clean the mess.

In sum, there are many externalities to what we do. This is not limited to economic transaction. There could be externalities from anything we do. In my opinion about the teenager’s binge drinking, the government should just give disadvantages to the teenagers for drinking. For example, if a student gets caught drinking, he/she can be sent to do 30 hours of service hours in alcoholic addiction support center as a punishment.

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2 Responses so far »

  1. 1

    oat17 said,

    Very nice post Sang. Keep up the good work.


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