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This article talks about "six leading American and Japanese automakers asked a federal judge in San Francisco today to dismiss a public nuisance lawsuit filed against them by the state of California over global warming."
These automobile firms are being fined for creating external costs to the society, which the whole society would have to take care of. Cars emit greenhouse gases such as carbon dioxide, which causes the greenhouse effect in the atmosphere. These external costs includes harm to public health, frequent extreme hot weather, increased flooding, and cost line erosion.
These additional costs are not paid for directly by the firm, therefore firms do not take this cost into account. Therefore at the market equilibrium, resources for cars are over allocated. To fix this market failure, the government taxes and fines these firms to move their costs curves upward, in order to meet the marginal social costs curve. Firms are unwilling to pay for this, because it lowers their profits.
Fining them is a good way to fix this market failure, as long as the fines are at the right amount. If building cars that create a lot of pollution would lead to fines, firms, as profit maximizers, would try to make the most environmentally friendly cars, despite of higher costs. Society would be better off as a whole.
1 条评论:
Carlos,
Is this the article you plan to use for your commentary? or the other one? This one is interesting, but i'd look for a better article on this story, as this one seems to focus narrowly on the auto makers' response to the lawsuit. You should find an article about the lawsuit itself. It is interesting, you can definitely focus on market failure (negative externalities) and the externalizing of costs by making taxpayers of California bear the costs of fixing the problems caused by overuse of vehicles. It's a classic problem, though of who do you blame, the drug dealers or the drug users? I wonder if consumers themselves are not to blame for driving gas guzzling cars in the first place?
When it comes to correcting this market failure, I think you're missing the point. The government is not fining the automakers, the public is taking them to court. This is an example of legislation being used to try and internalize the costs to society. The state is claiming that the automakers have broken a law, and are trying to use the legal system here.
Need some more analysis for sure... think about the graphs you can include...
Mr. Welker
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