What's Your Best Externality?

The last two years I’ve run an “externality” contest in my giant intro class, offering $5 to the student who comes up with the best example.

Both positive and negative externalities are welcome. I call on five students to tell the class their examples. My favorite this year was the student whose brother started wearing cut-off t-shirts (muscle shirts) but promptly proceeded to gain 100 pounds of fat. Worse still, the family name being Quackenbush, the brother had a duck tattooed on his flabby upper arm.

By voice vote, however, the class awarded the $5 to a woman who offered the negative externality of the throbbing bass played full-blast on the pickup truck parked in the lane next to you at a stoplight.

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  1. matt says:

    silent but deadly farts

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  2. Donnie says:

    Your $5 contest probably has a negative externality on the students’ other classes, which suffer because the students are trying to think up externalities for your class.

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  3. JOE says:

    Craig:
    I agree that was a confusing post, but I think the thought behind her ADT alarm point was that it somehow encourages burglars to rob a house without the alarm. (That or she thinks it’s a negative externality to take away the robber’s chance to make some income lol)
    And the gun is a positive one because it protects all the people in the neighborhood.
    All in all, pretty bad examples and a clear lack of understanding externalities

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  4. KarenS says:

    #16 Craig: Because the alarm sign tells the burglar which houses do (and presumably don’t) have alarms in their house. If a burglar is canvassing a neighborhood, he’s more likely to choose a house that doesn’t have one of the signs.

    When it comes to guns, the burglar has no way of knowing which houses have guns and which don’t. If it’s known that many houses in a neighborhood have a gun, he’s more likely to skip that neighborhood altogether, rather than take a chance.

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  5. TsaiCMS says:

    The worst negative externality is when a construction site for an apartment building is undergo besides your own apartment. This eliminates whatever possibility of naps, or quiet study time.

    I better be well treated by the people who will live in those apartments, and if they do, would this be both a negative and positive externality? Negative in the short run, positive in the long run.

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  6. Eric M. Jones says:

    Ebay externalities (positive and negative)…good PhD dissertation material:

    I have often speculated that the massive success of Ebay has both positive an negative externalities.

    When I buy an old chatzky on Ebay, some company who would like to sell me a new one does not get my business. Furthermore, many items I buy will be sold again on Ebay when I no longer have need for them. The effect this will have on the industry that makes chatzkys is hard to guess. An efficient online market is a new economic monster with unstudied consequences.

    The positive externalities might be the reduction in pollution and the increase in real wealth caused by the recycling of already-made products.

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  7. assumo says:

    Half of a tree recently fell down in the backyard of the house that I rent. The landlord had an arborist cut down the rest of the tree and save the wood in a pile that her father could pick up (leaving us none, by the way). We now have a huge mound of sawdust that no one thought to dispose of. This is going to create some extra work for me, but I ultimately see it as a benefit, since I’m planning on using it for mulch. Bonus?

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  8. Alex says:

    #22:
    Your “negative externality” is not actually an externality. In the era before Ebay, producers of widgets (much easier to spell than tchotke) faced a demand curve.

    In the era after Ebay, prodcers of widgets face a new demand curve. Very likely, this demand curve has shifted inwards; at any given price of widgets, fewer are demanded. This is because old widgets are a substitute for new widgets. It is possible that the demand curve will shift outwards, since the ability to resell a good would increase the demand for it. But this effect is probably small relative to the first effect.

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