I'm having trouble understanding external benefits and how exactly they are meant to be caught... if it is on the market, how is neither the consumer, nor the provider reaping benefits. Or, who exactly is gaining from this loose benefit? Perhaps it would make more sense if I could fully grasp what an external benefit would look like! If you could provide me with a tangible example that would be wonderful!
A tale of two yards:
I grew up without a father, so my lard is left wanting. Try as I might, my lawn is so despicable that it brings down the property values of those around me. This is an example of a negative externality.
The guy next to me either overcame his daddy issues, or learned a few lessons on lawn keeping from his pops. His lawn is so good, it actually increases the property values of those in the neighborhood. His exchanges with lawncare companies isn't just beneficial to him and the companies, but to the entire neighborhood.
Now, clearly, imagine the value to the entire neighborhood if I hired the same lawncare company as him!? One might say that I should tax my entire neighborhood an amount equivalent (or just under) their supposed increase in property value so that I can afford the lawncare services, and therefore, capture the positive externality.
Does this silly example help?
I grew up without a father, so my lard is left wanting. Try as I might, my lawn is so despicable that it brings down the property values of those around me. This is an example of a negative externality.
The guy next to me either overcame his daddy issues, or learned a few lessons on lawn keeping from his pops. His lawn is so good, it actually increases the property values of those in the neighborhood. His exchanges with lawncare companies isn't just beneficial to him and the companies, but to the entire neighborhood.
Now, clearly, imagine the value to the entire neighborhood if I hired the same lawncare company as him!? One might say that I should tax my entire neighborhood an amount equivalent (or just under) their supposed increase in property value so that I can afford the lawncare services, and therefore, capture the positive externality.
Does this silly example help?