Radu Simandan (Universitatea „Politehnica” Bucuresti)
Abstract
An externality exists whenever a transaction creates a cost or a benefit for a party not directly involved. Pollution, such as smoke emitted into the air or sewage poured into the water is an externality. In this paper I analyze the differences between Neo-classical and Austrian School of Economics regarding externalities and the best way to fight it. Neo-classicals are concerned about efficiency and they propose some forms of government intervention in order to alleviate pollution: taxes and tradable permits. Austrians seek to remove interpersonal conflict related to pollution and show that although taxes and permits could theoretically work, they fail to eliminate conflicts among people.
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Volume (Year): 7(502) (2006) Issue (Month): 7(502) (September) Pages: 97-100 Download reference. The following formats are available: HTML
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