Food Population Environment Exam 2

Intervention Failure

Market Failure

Externalities with regard to market failure

Too much or too little produced

Corrective Tax

Tax on activity causing externality that is equal to the external damage done to the third party(ies)

Command and control

Law requiring/forbidding behaviour

Cap and trade (3 steps)

1. Gov sets cap for max allowable quantity of pollution

2. Gov issues permits to firms equal to cap amount

3. Firms freely buy/sell permits amongst themselves

Flexible because it allows firms that are more efficient at reducing emissions to be paid for abating emissions of inefficient firms

How does climate change lead to crop failure

Floods

Droughts

Heat Waves

Modes of market Failure

Externalitites

Market Concentration

Four resource types

Common resources (Rival, non-excludable)

Public Goods (non-Rival, non-excludable)

Club Goods (non-Rival, excludable)

Private Goods (Rival, excludable)

Tragedy of the Commons

Common Resources have the inherent potential to be exhausted

Solutions to Tragedy of commons

Taxes, Permits, Communal Regulation, Privatization, Regulation

Hist. of US Ag. Policy 1920’s

Roaring 20’s

WWII over and Economy booming

Large scale automation begins(Better tractors)

Europe recovers and restarts Ag. production(bad for US bc supply increased so prices dropped)

Hist. of US Ag. Policy 1929-1939

Great Depression

FDR New Deal - First National Price Support Program(PSP)

• US subsidized farmers to produce less