Wednesday, September 1, 2010

Keep your externalities Positive---"Metering Out" benefits...

It is usually easier to find examples of negative externalities than positive ones.  Positive externalities are benefits accrued by society from a use of a good BUT the market does not provide enough of this good.  Government can play a role in promoting the production of this good by offering a subsidy to either produce it or for the consumer to purchase more of it (increase the quantity demanded and the quantity supplied will increase--it still induces production):
""More than 100,000 central Ohio households are on the leading edge of energy technology, having received high-tech electricity meters with the help of federal aid, a project an Obama administration official praised yesterday.As soon as October, the customers will be able to use an AEP website to track their electricity usage the previous day. Future versions of the meters might allow for real-time tracking.  Electric utilities eventually might use the technology to offer different prices for power, depending on the time of day, which would encourage customers to use less power during times of high demand. This kind of change to pricing would require approval by state regulators.  As Chu sees it, the meters' main asset is the way they provide information that can be used to cut power bills.  "First and foremost, it's about saving money," he said."" (Source: Environmental Economics)
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