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Thread: Externalities

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    Politics.ie Member Socratus O' Pericles's Avatar
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    Default Externalities

    I've come across a new term (for me) i.e. externalities it seems that it is a positive or negative side effect of an economic transaction.

    That is it is something the market does not allow for? Examples given were pollution and beekeeping.

    If a bank fails it is not the fault of any one transaction but a series of transactions can cause the externality of bank failure. Moral hazard is wrapped u pin here somewhere too. At this stage I couldn't follow the discussion any more.

    Anybody any thoughts on this??

  2. #2

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    NAMA is a negative externality for the housing market. Keeping house prices artificially high.

    The ECB rate was a negative externality on the market too, giving out interest rates way below the natural rate of interest causing the bubble.
    “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” - Friedrich A. Hayek

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    I have no thoughts and no clue as to how beekeeping can damage the economy myself.

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    Quote Originally Posted by captainwillard View Post
    I have no thoughts and no clue as to how beekeeping can damage the economy myself.
    Beekeeping is a positive externality.
    “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” - Friedrich A. Hayek

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    Politics.ie Member Squire Allworthy's Avatar
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    Quote Originally Posted by Cassandra Syndrome View Post
    Beekeeping is a positive externality.

    Hard to think of anything more positive.


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    Externalities...yeah the things that the cartoon world of neo-liberalism pretends don't exist.

    Externalities are the whole reason why we have legal frameworks, Governments, regulation etc in the first place. They exist - not in every industry or at all times, but they exist. Pretending otherwise is never going to work, and in fact the kind of lunatic meddling proposed by the Wingnuts - take the electricity market in Ireland for example, or in the UK Maggie and the train network, or banks everywhere - to "introduce competition" or "liberalise" markets with huge externalities or natural impulses towards monopoly usually end up making the situation much worse.

    Externalities, along with the nature of money, and study of the history of asset bubbles are three critical areas that are sadly neglected or glossed over in many economics courses. I suppose that's how we end up with the likes of Comical Austin and Desperate Dan.

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    Politics.ie Member PAD1OH's Avatar
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    Quote Originally Posted by captainwillard View Post
    I have no thoughts and no clue as to how beekeeping can damage the economy myself.
    the theory is if I buy some bees to make myself an oul bit of honey and then my bees fly into your garden and pollinate your plants and you sell them on you have gained something at my expense.

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    Quote Originally Posted by PAD1OH View Post
    the theory is if I buy some bees to make myself an oul bit of honey and then my bees fly into your garden and pollinate your plants and you sell them on you have gained something at my expense.
    Your neighbour's flowers provided your bees with the nectar to make you your honey, so both of ye gained.
    ''The tattoo has a profound meaning: the superficiality of modern man’s existence.'' - Theodore Dalrymple

    "Any fool can make something complicated. It takes a genius to make it simple." - Woody Guthrie

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    Ok lets all go out and buy bees. That will solve our economic problems.

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    Politics.ie Member Squire Allworthy's Avatar
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    Quote Originally Posted by captainwillard View Post
    Ok lets all go out and buy bees. That will solve our economic problems.

    At least bee keeping produces honey and bees wax and helps the pollination of crops. It produces real tangible goods and wealth.

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