Evaluating Negative Production Externalities: A Step-by-Step Explanation

Peter Jordan discusses negative production externalities, focusing on industrial pollution and market failure. He emphasizes the importance of evaluating the magnitude of market failure and how it influences government intervention. The video compares externalities in pharmaceuticals and gaming devices, highlighting the challenges in measuring and valuing them. The discussion concludes with the potential for government failure if the significance of externalities is misjudged.

What are negative production externalities and how do they relate to industrial pollution?

Explain the significance of the deadweight welfare loss triangle in the context of market failure.

How does the perception of the magnitude of a market failure influence government intervention?

Discuss the challenges in measuring and valuing externalities.

Compare the externalities associated with pharmaceuticals and gaming devices.

How can government policies be matched to the size of the deadweight loss triangle?

What are the potential consequences of misjudging the significance of an externality?