Economic Externality And Its Countermeasures

The thesis concentrates on the issues of economic externalities and its counter measures. It analyzes the content of external economy and the theory of development and evolution systematically, based on which it explained the dangers of economic externalities, as well as measures of dealing with economic externalities. It draws conclusions that pure market mechanisms or government regulation will bring some disadvantages and problems, so the reasonable approach should be complementary in functions of market mechanisms and of government regulation.The first part is the introduction of the whole thesis. It mainly discusses the significance of the topic, research trends and relevant research methods. There have been more advanced theories on economic externalities in foreign countries, and there are many scholars doing the research of the issues constantly. The methods used are as follows: normative analysis, cost-benefit analysis, the binding assay of qualitative analysis and quantitative analysis, marginal analysis and so on.The first chapter discusses the economic externalities and its theoretical development, including the meaning of economic externalities, classification, related externality theory and its further evolution. The thesis mainly analyzes the harms of negative externalities and its remedies, and it also concerns the issues of positive externalities. For the development of the economic externalities, the thesis starts its discussion from the landmark theories of Marshall, Pigou and Coase.Chapter2focuses on the topics of market failure and government failure from the perspective of externality. The mechanism analysis of externality and market failure describes the relation between externality and the phenomena of market failure such as public goods, monopoly, asymmetric information, imperfect competition. To a certain extent, government regulation has led to the existence of government failure. The thesis elaborates the relationship between externality and government failure from aspects of supply of public goods, asymmetric information, ineffective policies, and failure of government regulation.The third chapter discusses the negative impact of economic externalities from different dimensions, mainly relating to excessive consumption of public goods, environmental damage and the impact of technological innovation. The hazards of economic externalities are everywhere in modern economic life, and it has brought enormous danger: firstly, it leads to the distortions in the allocation of resources, as well as environmental degradation; secondly, it causes unbalance of region development; finally, it do harm to the fairness and justice of social development. As a result, we must take effective measures to improve the current situation.According to externality hazards described above, chapter4has proposed the coping strategies of the issues. Traditional methods mainly introduce the specific application of "Pigou Tax" and "Coase Theorem". The thesis argues that the approaches to deal with economic external issues include:improving market, government regulation, technological innovation, improving the organizational level of market agents and moral standards.Chapter5is the conclusions of the article. Economic externalities exist in every corner of modern economic society, and the impact of it is everywhere and at all times. A single government or market can’t deal with such issues effectively. Therefore, government and market should complement each other in order to solve the problems efficiently.