Steve Levitt
speaker
962 appearances
8 recordings
1 series
first heard Dec 2024
last heard 31 Jul
Steve Levitt’s voice in public audio — every appearance, attributed to the second.
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recordings per month · last 12 monthsRecordings per month over the last 12 months — 5 in all, peaking in Jul 2026 with 2.
Appearances
So examples would be the pollution from factories, the stench from pig farms, traffic jams on the roads because too many people are trying to drive to work, secondhand smoke.
It goes on and on and on.
OK.
So when there is a negative externality associated with an activity, then economists worry that the free market provides too much of that activity, right?
The pig farmer, the polluting factory, they aren't responsible for the full damages of their pollution.
And they don't factor those costs into their decisions about how much to produce.
And so they make too much.
So negative externalities are a problem.
How do economists try to fix that problem?
And that's a way of internalizing the externality, making the producer take that into account.
So it seems logical if a negative externality leads to market failure where there's too much production and then you tax it.
Well, then with a positive externality, it would stand to reason that with the free market, there are too few bees around and maybe too few apple orchards.
And that's what James Mead conjectured.
But then in 1973, Stephen Chung gathered some data
And it didn't seem to be true.
It's interesting because as you pointed out, there are reciprocal benefits.
The bees are helping the apple orchard and the apple orchard is helping the beekeeper to have more honey and better tasting honey.
So it's not actually completely obvious ex ante which way the payments should go.
You could imagine that maybe the beekeepers would have to pay the owners of the apple orchards or vice versa.
So why do you think it turned out that it's the apple farmers who are paying the beekeepers?
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