Sunday, October 18, 2009

Internalizing Externalities?

Charleston's Post & Courier published an article today that might come in handy when teaching the concept of externalities and how parties may or not be able to resolve them through internalization (the second concept).  The article, by journalist Tony Bartelme, is titled, "What are these black particles?  Health and safety concerns bring to light a longtime issue for residents living near coal-fired plant."  The article provides examples of issues that might impede internalization, namely the assembly problem, free riders, and other transaction costs.  Notwithstanding the presence of black particles in drinking water or a fine dust that covers outside surfaces in residential areas near the plant, some residents have been reluctant to speak out.  Others report that complaints to the power company have never been answered, although the company took steps in the past to reach settlements with certain residents, purchased contaminated land, and upgraded systems to reduce pollution.  Research conducted by the local newspaper along with area scientists suggest the presence of coal particles in drinking water, although the specific source remains unindentified.  Whether and how affected parties will account for these latest externalities remains to be seen.  A purely voluntary solution seems unlikely.

Will Cook, Charleston School of Law

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