Changes in property rights. Coase theorem
This involves giving property rights to certain people. E.g. Fishermen could be given property rights to a river.
If negative externalities occur, then the property owners could sue the company who caused the damage. This would be socially efficient because they could charge the polluter the true social cost - E.g. The fishermen could Charge the chemical firm.
Problems of Changes in Property Rights
1. Difficult to give property rights for things like air, seas and rivers
2. Impractical for people to sue. E.g. could people in Scandinavia sue people in UK for acid rain?
3. It is unfair: E.g. if the Chemical firm had property rights the fishermen would have to pay the chemical firm to stop producing chemicals.
4. It is difficult to give property rights to future generations, the environment, animals, the sky. Not practical for most negative externalities.
Essays and Revision Notes on Market Failure
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