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Positive and Negative Externalities - Research Paper Example

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This paper identifies and discusses three externalities that exist in particular situations in economics. It will also highlight solutions to mitigate these externalities. It will finally analyze the different stakeholders involved in the externalities and their role regarding the externality…
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Positive and Negative Externalities
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Positive and Negative ExternalitiesPositive and Negative ExternalitiesIntroduction In economics, externalities are costs or benefits that result from transactions or activities, and that affect an uninvolved party whose choice was not to incur any particular costs or benefits. These externalities can either be positive or negative. Negative externalities are actions of products on consumers which have a negative implication on the third party. Positive externalities are actions on product which are beneficial to the third party (Tulkens & Chander, 2006). This paper will identify and discuss three externalities that exist in particular situations. It will also highlight solutions to mitigate these externalities. It will finally analyze the different stakeholders involved in the externalities and their role regarding the externality.Three Externalities There are negative externalities related to environmental consequences. An example of a negative externality with environmental consequences is pollution. There are different forms of pollution: air, water, and noise. Air pollution has public health implications and causes damage to buildings and crops. Water pollution has the potential to cause harm to humans, plants, and animals. Noise pollution, on the other hand, might cause disruptions, both mental and psychological, to people and animals. Public goods are an example of a positive externality. These are the goods which benefits people cannot be excluded from enjoying. Public goods include clean water, public defense, law enforcement, social amenities, and so on. These goods are accessible to most people in the society (Tulkens & Chander, 2006).   If businesses start accepting payments online for the services and goods they offer, these actions can lead to a negative externality. This means that clients no longer need to buy paper cheques in order to pay, a situation which means that cheque printing firms will lose revenues. This can also result into unemployment especially for employees whose role is processing cheques.Situations Within Which These Three Externalities Exist In the course of the company operation, byproducts are created. These byproducts make their way into the environment and cause pollution. Air pollution results from the burning of fossil fuels in industries. Water pollution occurs when industrial wastes are deposited into water sources. Noise pollution occurs in situations where the production process emits destructive sounds that get into the atmosphere. Public goods exist for the satisfaction of the needs of the entire society. These goods exist so that everyone in the society can benefit from them. If such goods did not exist, then people in the society would suffer since they could not afford some of these goods (Tulkens & Chander, 2006).  For instance, a person cannot have the finances to build their own roads to use. Today a common trend in business is selling products online. Many companies are slowly embracing e-commerce which is why it has become a common form of conducting business and a reason of cheque reduction.Solutions to These Externalities Pollution can be addressed through making proper arrangements when it comes to disposing byproducts from manufacturing processes. These disposal methods can include dumping them in landfills instead of dumping them without taking any caution. It also involves flushing wastes into oceans instead of allowing them run into rivers. Another strategy could be adopting sound mitigation mechanisms so that the excess of noise from the factory does not reach the public. If organizations become keen on using new technologies that reduce emissions, then the problem of pollution will be solved. Ensuring that the public goods are available for the entire society is a way of reducing the chances of people lacking important amenities (Tulkens & Chander, 2006). Discouraging businesses from going into e-commerce can lead people to make purchases through cheques. Therefore, organizations manufacturing these cheques will still be in business.Stakeholders Involved in Externalities There are different stakeholders who are a part of these externalities. These stakeholders are involved in the externalities at different levels. The stakeholders include the government, the community, suppliers, and employees.Roles of Stakeholders in Regard to Externalities The government has a role to play when it comes to some of these externalities. The government has a mandate to enact laws against pollution. Companies should ensure that they follow these laws, failing which they can face prosecution from the government. The government is also in charge of providing public goods. It should ensure that these goods are provided to the society and always maintained. Suppliers of cheques and employees in banks are the ones who suffer in cases where businesses adopt e-commerce business strategies. This is because their work entails providing cheques for suppliers and clearing cheques for employees in banks. In case a business carries its transactions online, then the suppliers will have nothing to do as their involvement with the business will have been cut short (Tulkens, & Chander, 2006).  
Conclusion There are many externalities which exist. The effects of negative externalities can be mitigated and, at the same time, the benefits of positive externalities can also be enhanced. Therefore, companies should strive to create positive externalities and reduce negative ones.
ReferencesTulkens, H. & Chander, P.  (2006). Public goods, environmental externalities and fiscal competition selected papers on competition, efficiency, and cooperation in public economics. New York: Springer.  Read More
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