Economics Portfolio, Microeconomics, EXTERNALITIES Essay

Economics Portfolio, Microeconomics, EXTERNALITIES - Essay Example "However, it must be remembered that such campaigns will not change attitudes overnight. These are the early stages, and we hope to see more progress made in a further round of a dozen or so campaigns this summer." "We have squads out working seven days a week. They start at the top of Royal Avenue, down one side of the street to Donegal Place, then across the place to the other side of Royal Avenue and back up to the top. Councils involved in the campaign are: Belfast, Blackburn with Darwen, Bradford. Brighton and Hove, Cardiff, Crawley, East Herts, Edinburgh, Kensington and Chelsea, Lambeth, Leeds, Liverpool, Middlesbrough, Nottingham, Oldham, Oxford, Slough, Stoke-on-Trent, Swindon and Westminster An externality in economics occurs when one action causes another action and the side effects of this cause and effect is not accounted for in market prices. A good example is demonstrated by the cost of gum to the ultimate consumer and the consequential costs of pollution to the government. `It costs 3p a stick to buy, but 10p to prise off the pavements. And councils across Britain are getting sick of having to foot the bill for cleaning it up. (See source article ) As demonstrated by the source article, the government, via council members are uninterested third parties to the gum industry. The obligation to keep the city streets clean and pollution free (as far as reasonably possible) is imposed on the government by tax payers and the democratic process. As a result, the government is unwittingly a stakeholder in the gum industry. According to the source article the costs to the government is more than three times larger than the cost to the consumer. Both Friedrich Havek and Milton Friedman, economists, when alluding to the term `economic externalities have described the phrase as neighborhood effects and spillovers interchangeably.(Cordato. 1992) Pollution is the `spillover