Author: Lori Alden
Audience: High school
and college economics students
Time required: About
NCEE Standards: 16,
tend to frown on the use of regulations to control externalities.
This exercise demonstrates that good regulations are difficult to
Instructions: Assign students
to small groups of 3-5 and give each of them a copy of the
following handout. Have representatives from the groups
present their findings to the class.
Imagine what it would be like if we
tried to control all external costs with regulations. Here's
what some of the regulations might look like:
13,327. Alarm clocks.
The clock's sound-generating mechanism must be set to 60
decibels or less if others are sleeping within a 25 foot radius of
the clock and choose not to be awakened by it.
Rule 5,219. Birthday
candles. The person
celebrating his or her birthday (hereinafter known as the Birthday
Person) shall spray as little moisture on the cake as possible
when blowing out the candles.
The Birthday Person shall refrain from blowing out the candles if
he or she has a cold, flu, or other contagious disease.
Suppose the Birthday Person has
athlete's foot ─ a contagious disease.
Does that means she shouldn't blow out her birthday candles?
2. Think of other situations
in which these rules wouldn't work well, then amend the rules to allow
for these situations.
3. Do you think the
government should attempt to control these types of externalities?
If not, how should they be controlled?
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