The creator plays two characters, a teacher and a factory owner, in a town hall meeting to explain the economic concept of externalities. He first uses the factory owner's business to illustrate positive externalities (a more educated society) and then uses the same factory to explain negative externalities (pollution, sickness, deforestation). Finally, he introduces the Pigouvian tax as a solution, which angers the factory owner who then comically fails to enact his revenge.
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It's worth considering all the INDIRECT economic effects! The world tour continues with this week's episode: Piles of cash and a town of solutions in Kenya, Nigeria
Producer: @jackcorbe • Jack Corbett / NPR.
Editor: @alexgoldmark • Alex Goldmark/NPR.
Transcript
This town hall meeting is to make sure we're all paying our fair share. Great. Baron Von Glop, you're okay with this. Yes. I was wondering when this might happen. My factory prints books and I sell the books to the schools. The kids read the books and become smarter, more likely to graduate, go on to college, get higher paying jobs, pay more taxes, be less of a cost to society. So how much do you all wanna pay me for that economic boon I have? Yeah. Those are externalities. Tier mean, sometimes rank economic transaction leads to an extra gain or cost that spills over to society. And it's only fair for me to get some compensation for this spillover game. Yeah. Some activities with positive externalities are definitely worth subsidizing. Like, if your country's poor, where do you go about investing your money to make it more prosperous? Pay to build some factories. Order. Economists working in Kenya found you could invest in people, like best in health care rank education, and rely on all the positive externalities of a smarter and stronger population working better, make your country richer and a better place to live. Yeah. So can I get a check or can Venmo request you guys? Let's calculate your other externalities. Incredible. Your factory glutes the river which kills the fish which is an extra cost for the fishermen on the lake. And the exhaust from the factory is making people sick in town which is rank extra cost they have to pay for health care. And you're cutting down trees for the paper which destroys animal ecosystem, turns our town's bird walking tourism. Overall, your externalities are negative. And to deal with negative externalities, we can use what's called a Pigovian tax. These taxes try to put an exact dollar amount on how much your economic activity harms society, Tier it makes you pay that cost back to society. You want me to pay for the indirect effects of my own actions? For that, you'll all be sorry. I've built a machine to indirectly flood the valley, turn the whole town into my own private swimming pool, to which none of you are invited. Rank it.