Economics of Firms and Environmental Policy

These flashcards cover key concepts related to firms, private equity, environmental policy, and economic theories discussed in the lecture.

Coase Theorem

Firms are organizations that combine factors of production directed by an entrepreneur rather than by the market.

Transaction Costs

Firms exist to reduce transaction costs associated with market exchanges.

Pricing Mechanism

The managerial allocation of resources does not rely on the pricing mechanism.

Employee Ownership

When coupled with worker participation, employee ownership can boost profits.

Private Equity Firms

Firms that buy, fix, then resell, often with incentives to greenwash.

Patient Capital

Private firms have more patient capital than public firms, meaning they have a longer-term investment horizon.

Blockholders

Concentrated ownership, like blockholders, indicates more patient capital.

Climate Policy

More patient ownership leads to less opposition to climate policy.

Salient Prices

Gas prices are more salient than electric prices in motivating consumers to switch to electric vehicles.

Subsidies vs. Taxes

Subsidies for electric vehicles should outweigh taxes to manage electricity demand.

Differential Emissions

Private firms tend to emit less and are less likely to incur EPA penalties.

Induced Innovation

Increases in factors of production, like a carbon price, can drive innovation.

Carbon Offsets

Carbon offsets must be additional and not something that would have happened anyway.

Doubt in Science

Exxon’s approach involves doubting climate science, framing it as a balanced approach.

Target Groups for Climate Messaging

Target groups for climate messaging can include older uneducated men and young low-income women.