This is generally a very interesting chapter for everyone. What is an example of a negative externality that interests you? Could the problem be solved via negotiation (Coase Theorem)? Why or why not? Do you favor regulation to solve this externality? Why or why not?
Negative externalities occur when the consumption or production of a good causes a harmful effect to a third party. A negative externality that interests me is pollution, disposal of toxic wastes, various degradable and nondegradable wastes that pollute the worlds waterways.., If you produce chemicals and cause pollution as a side effect, then local fisherman will not be able to catch fish. This loss of income will be the negative externality. In this case, a payment from the affected party to the polluter would reduce the pollution. Therefore, the Coase theorem states that the most efficient solution to resolving interdependent uses of the environment, including pollution cases, is a bargaining process.
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