Nathalie Heidema, Chapter 3, Question 6

There are three passages that were interesting or struck me. The first one is the various solutions to negative externalities. For example, children on airplanes are a negative externality for the people sitting nearby them. The parents do not pay the full cost of the cost they put on the other passengers. In fact, babies on board travel for free. The solution of economists would be to make families with children stay in the back of the plane. 

The next is the sad reality of plants that release CO2 (e.g. in the US) and cause floods in other parts of the world, or other emissions that cause acid rains. These companies or firms definitely do not bear the full cost of pollution or damage they create.

The passage with smokers was quite shocking to me. At first, when I was reading about the negative externalities of smokers, it seemed all obvious and well-known to me. But when Wheelan said that smokers actually do us a favor I was shocked. And indeed, the fact that smokers die young ( circa 7 years earlier than no smokers) make us enjoy the benefits of Social Security or private pensions more (than they do). In fact, the government of Czech republic saves $28 million a year on pensions and old-age housings because of the death of smokers.