This is a revision presentation on negative externalities

We cover a lot in this section. The overall theme is the presence of negative externalities arising from production and consumption that create negative spill over effects for 3rd parties. Externalities can cause market failure if they are not taken into account by the price mechanism. If the market failure is considered to be serious (a value judgement is made here together with research evidence) then there is a case for government intervention.

Evaluation arguments surround the types of policy interventions that are most effective and equitable in internalising some of the external costs. Can market forces - driven by the profit motive - find appropriate solutions to the problems of externalities?