[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:00.54,0:00:04.07,Default,,0000,0000,0000,,In the last video, we first\Nthought about externalities,
Dialogue: 0,0:00:04.07,0:00:05.61,Default,,0000,0000,0000,,the negative externalities
Dialogue: 0,0:00:05.61,0:00:07.60,Default,,0000,0000,0000,,of having plastic bags around.
Dialogue: 0,0:00:07.60,0:00:09.61,Default,,0000,0000,0000,,It causes litter, it might damage animals
Dialogue: 0,0:00:09.61,0:00:11.61,Default,,0000,0000,0000,,and the environment in some way.
Dialogue: 0,0:00:11.61,0:00:14.28,Default,,0000,0000,0000,,We're assuming ... And\Nwe assumed in that video
Dialogue: 0,0:00:14.28,0:00:16.61,Default,,0000,0000,0000,,that we were able to calculate the actual
Dialogue: 0,0:00:16.61,0:00:19.28,Default,,0000,0000,0000,,external cost of a plastic bag.
Dialogue: 0,0:00:19.28,0:00:21.69,Default,,0000,0000,0000,,This two cents a bag is the impact on
Dialogue: 0,0:00:21.69,0:00:22.67,Default,,0000,0000,0000,,litter in the environment.
Dialogue: 0,0:00:22.67,0:00:24.27,Default,,0000,0000,0000,,Then we were able to figure out
Dialogue: 0,0:00:24.27,0:00:25.67,Default,,0000,0000,0000,,that if we factor this in,
Dialogue: 0,0:00:25.67,0:00:27.14,Default,,0000,0000,0000,,instead of just having the regular
Dialogue: 0,0:00:27.14,0:00:28.54,Default,,0000,0000,0000,,marginal cost cover the suppliers,
Dialogue: 0,0:00:28.54,0:00:30.36,Default,,0000,0000,0000,,if we added that marginal cost curve
Dialogue: 0,0:00:30.36,0:00:32.14,Default,,0000,0000,0000,,to the external cost,
Dialogue: 0,0:00:32.14,0:00:33.70,Default,,0000,0000,0000,,we would get a supplier plus
Dialogue: 0,0:00:33.70,0:00:36.33,Default,,0000,0000,0000,,external costs, marginal cost curve,
Dialogue: 0,0:00:36.33,0:00:37.100,Default,,0000,0000,0000,,and then we'd get what is actually
Dialogue: 0,0:00:37.100,0:00:42.11,Default,,0000,0000,0000,,the optimal price and\Nquantity of plastic bags
Dialogue: 0,0:00:42.11,0:00:44.45,Default,,0000,0000,0000,,so that we actually do not eat into
Dialogue: 0,0:00:44.45,0:00:45.94,Default,,0000,0000,0000,,our surplus by creating all of this
Dialogue: 0,0:00:45.94,0:00:49.16,Default,,0000,0000,0000,,negative surplus where the total cost
Dialogue: 0,0:00:49.16,0:00:50.21,Default,,0000,0000,0000,,of the bags are higher than
Dialogue: 0,0:00:50.21,0:00:52.13,Default,,0000,0000,0000,,the total benefit.
Dialogue: 0,0:00:52.13,0:00:53.72,Default,,0000,0000,0000,,One thing that we did not touch on
Dialogue: 0,0:00:53.72,0:00:56.04,Default,,0000,0000,0000,,in that video, is how\Ndoes this actually happen?
Dialogue: 0,0:00:56.04,0:00:59.22,Default,,0000,0000,0000,,If we just let things be,
Dialogue: 0,0:00:59.22,0:01:00.47,Default,,0000,0000,0000,,and we just had the supplier's
Dialogue: 0,0:01:00.47,0:01:01.67,Default,,0000,0000,0000,,marginal cost curve
Dialogue: 0,0:01:01.67,0:01:04.33,Default,,0000,0000,0000,,and we have the consumer's demand curve,
Dialogue: 0,0:01:04.33,0:01:06.72,Default,,0000,0000,0000,,in this case, the consumers\Nwere the supermarkets,
Dialogue: 0,0:01:06.72,0:01:08.34,Default,,0000,0000,0000,,then the equilibrium price that'll be
Dialogue: 0,0:01:08.34,0:01:09.93,Default,,0000,0000,0000,,reached will be right over here
Dialogue: 0,0:01:09.93,0:01:12.21,Default,,0000,0000,0000,,because although we're theoretically
Dialogue: 0,0:01:12.21,0:01:14.00,Default,,0000,0000,0000,,saying that there's this cost over here,
Dialogue: 0,0:01:14.00,0:01:17.54,Default,,0000,0000,0000,,the cost won't be factored in
Dialogue: 0,0:01:17.54,0:01:18.88,Default,,0000,0000,0000,,into the markets.
Dialogue: 0,0:01:18.88,0:01:21.14,Default,,0000,0000,0000,,So if you are the benevolent emperor
Dialogue: 0,0:01:21.14,0:01:23.88,Default,,0000,0000,0000,,in this society, what do you do?
Dialogue: 0,0:01:23.88,0:01:26.30,Default,,0000,0000,0000,,What do you do to get the quantity
Dialogue: 0,0:01:26.30,0:01:28.55,Default,,0000,0000,0000,,closer to this point right over here
Dialogue: 0,0:01:28.55,0:01:30.13,Default,,0000,0000,0000,,than what the equilibrium quantity
Dialogue: 0,0:01:30.13,0:01:31.80,Default,,0000,0000,0000,,will be when you don't factor in
Dialogue: 0,0:01:31.80,0:01:33.01,Default,,0000,0000,0000,,the external cost?
Dialogue: 0,0:01:33.01,0:01:34.74,Default,,0000,0000,0000,,There's a bunch of options here.
Dialogue: 0,0:01:34.74,0:01:37.47,Default,,0000,0000,0000,,You could just ban plastic bags ...
Dialogue: 0,0:01:37.47,0:01:41.13,Default,,0000,0000,0000,,ban plastic bags,
Dialogue: 0,0:01:41.13,0:01:44.07,Default,,0000,0000,0000,,you could put a quota on plastic bags,
Dialogue: 0,0:01:44.07,0:01:47.88,Default,,0000,0000,0000,,you could put a quota, so saying that
Dialogue: 0,0:01:47.88,0:01:50.47,Default,,0000,0000,0000,,more than a certain amount of bags
Dialogue: 0,0:01:50.47,0:01:52.40,Default,,0000,0000,0000,,could not be produced, or
Dialogue: 0,0:01:52.40,0:01:54.47,Default,,0000,0000,0000,,you could tax plastic bags,
Dialogue: 0,0:01:54.47,0:01:57.33,Default,,0000,0000,0000,,or you could tax plastic bags.
Dialogue: 0,0:01:57.33,0:01:59.34,Default,,0000,0000,0000,,Let's think about which of these will
Dialogue: 0,0:01:59.34,0:02:01.60,Default,,0000,0000,0000,,result in the most surplus,
Dialogue: 0,0:02:01.60,0:02:05.04,Default,,0000,0000,0000,,the most benefit to society in aggregate.
Dialogue: 0,0:02:05.04,0:02:06.96,Default,,0000,0000,0000,,One core assumption we're going to make
Dialogue: 0,0:02:06.96,0:02:10.40,Default,,0000,0000,0000,,is that this is an accurate assessment
Dialogue: 0,0:02:10.40,0:02:13.33,Default,,0000,0000,0000,,of the external cost per bag.
Dialogue: 0,0:02:13.33,0:02:15.40,Default,,0000,0000,0000,,If you were to just ban plastic bags
Dialogue: 0,0:02:15.40,0:02:16.88,Default,,0000,0000,0000,,as this benevolent emperor,
Dialogue: 0,0:02:16.88,0:02:18.07,Default,,0000,0000,0000,,maybe seemingly or hopefully
Dialogue: 0,0:02:18.07,0:02:20.40,Default,,0000,0000,0000,,benevolent emperor of\Nthis society right here,
Dialogue: 0,0:02:20.40,0:02:22.07,Default,,0000,0000,0000,,if you just banned plastic bags,
Dialogue: 0,0:02:22.07,0:02:23.40,Default,,0000,0000,0000,,what would happen?
Dialogue: 0,0:02:23.40,0:02:25.47,Default,,0000,0000,0000,,Well, then this market just won't exist.
Dialogue: 0,0:02:25.47,0:02:27.88,Default,,0000,0000,0000,,All of this surplus\Nthat could have existed,
Dialogue: 0,0:02:27.88,0:02:29.55,Default,,0000,0000,0000,,won't exist anymore,
Dialogue: 0,0:02:29.55,0:02:32.13,Default,,0000,0000,0000,,so you would actually\Nbe destroying surplus.
Dialogue: 0,0:02:32.13,0:02:33.67,Default,,0000,0000,0000,,You could say, "No,\Nno, no ... plastic bags
Dialogue: 0,0:02:33.67,0:02:35.74,Default,,0000,0000,0000,,are horrible. They should\Njust be outright banned.
Dialogue: 0,0:02:35.74,0:02:37.46,Default,,0000,0000,0000,,There's no amount of benefit for which
Dialogue: 0,0:02:37.46,0:02:40.34,Default,,0000,0000,0000,,plastic bags are worth using,"
Dialogue: 0,0:02:40.34,0:02:41.88,Default,,0000,0000,0000,,but in that case, you're actually arguing
Dialogue: 0,0:02:41.88,0:02:43.71,Default,,0000,0000,0000,,this point right over here.
Dialogue: 0,0:02:43.71,0:02:45.07,Default,,0000,0000,0000,,You'd be arguing that, "No, it's not
Dialogue: 0,0:02:45.07,0:02:46.92,Default,,0000,0000,0000,,2 cents a bag, it's 10 cents a bag,"
Dialogue: 0,0:02:46.92,0:02:50.28,Default,,0000,0000,0000,,of negative externality,\Nand because of that,
Dialogue: 0,0:02:50.28,0:02:52.45,Default,,0000,0000,0000,,you would have this\Ncurve shift up even more
Dialogue: 0,0:02:52.45,0:02:54.78,Default,,0000,0000,0000,,and then there's no\Npositive quantity there
Dialogue: 0,0:02:54.78,0:02:56.61,Default,,0000,0000,0000,,and maybe a ban would be all right.
Dialogue: 0,0:02:56.61,0:02:58.92,Default,,0000,0000,0000,,But if the 2 cents is the externality,
Dialogue: 0,0:02:58.92,0:03:00.36,Default,,0000,0000,0000,,the negative externality,
Dialogue: 0,0:03:00.36,0:03:02.05,Default,,0000,0000,0000,,and if you were to ban plastic bags,
Dialogue: 0,0:03:02.05,0:03:04.19,Default,,0000,0000,0000,,then you would actually be removing,
Dialogue: 0,0:03:04.19,0:03:07.52,Default,,0000,0000,0000,,you would be removing\Nthis surplus from society.
Dialogue: 0,0:03:07.52,0:03:10.39,Default,,0000,0000,0000,,That doesn't seem like a good option.
Dialogue: 0,0:03:10.39,0:03:12.35,Default,,0000,0000,0000,,Now what about a quota?
Dialogue: 0,0:03:12.35,0:03:15.19,Default,,0000,0000,0000,,You kind of look at the\Nstudy right over here
Dialogue: 0,0:03:15.19,0:03:17.75,Default,,0000,0000,0000,,and you say, "Look, the optimal amount
Dialogue: 0,0:03:17.75,0:03:20.62,Default,,0000,0000,0000,,of plastic bags is 1.9\Nmillion bags per week,
Dialogue: 0,0:03:20.62,0:03:22.80,Default,,0000,0000,0000,,so I will just say that that's most
Dialogue: 0,0:03:22.80,0:03:24.87,Default,,0000,0000,0000,,that the market can produce."
Dialogue: 0,0:03:24.87,0:03:26.67,Default,,0000,0000,0000,,But when you say that, that's assuming
Dialogue: 0,0:03:26.67,0:03:28.54,Default,,0000,0000,0000,,that you really do understand what this
Dialogue: 0,0:03:28.54,0:03:30.21,Default,,0000,0000,0000,,demand curve looks like.
Dialogue: 0,0:03:30.21,0:03:31.40,Default,,0000,0000,0000,,I just drew a straight line here
Dialogue: 0,0:03:31.40,0:03:32.62,Default,,0000,0000,0000,,just out of simplicity, and
Dialogue: 0,0:03:32.62,0:03:33.93,Default,,0000,0000,0000,,assuming that you really do understand
Dialogue: 0,0:03:33.93,0:03:36.29,Default,,0000,0000,0000,,what this marginal cost curve looks like.
Dialogue: 0,0:03:36.29,0:03:38.37,Default,,0000,0000,0000,,Throughout this playlist,
Dialogue: 0,0:03:38.37,0:03:39.67,Default,,0000,0000,0000,,we've been assuming that we kind of do
Dialogue: 0,0:03:39.67,0:03:40.87,Default,,0000,0000,0000,,understand those things, but
Dialogue: 0,0:03:40.87,0:03:43.74,Default,,0000,0000,0000,,in the real world, it's actually very hard
Dialogue: 0,0:03:43.74,0:03:45.53,Default,,0000,0000,0000,,to know exactly what the marginal cost
Dialogue: 0,0:03:45.53,0:03:46.70,Default,,0000,0000,0000,,of the curve looks like,
Dialogue: 0,0:03:46.70,0:03:47.81,Default,,0000,0000,0000,,and it's also hard to know exactly
Dialogue: 0,0:03:47.81,0:03:49.74,Default,,0000,0000,0000,,what the marginal benefit curve,
Dialogue: 0,0:03:49.74,0:03:51.21,Default,,0000,0000,0000,,or the demand curve looks like,
Dialogue: 0,0:03:51.21,0:03:53.33,Default,,0000,0000,0000,,especially because\Nthey're always changing.
Dialogue: 0,0:03:53.33,0:03:54.45,Default,,0000,0000,0000,,There's always more competitors,
Dialogue: 0,0:03:54.45,0:03:56.45,Default,,0000,0000,0000,,less competitors, more\Nsubstitute products,
Dialogue: 0,0:03:56.45,0:03:58.66,Default,,0000,0000,0000,,more R&D, things are\Ngetting more efficient,
Dialogue: 0,0:03:58.66,0:04:00.62,Default,,0000,0000,0000,,less efficient; and so it's very hard
Dialogue: 0,0:04:00.62,0:04:03.62,Default,,0000,0000,0000,,to know what the true equilibrium
Dialogue: 0,0:04:03.62,0:04:05.60,Default,,0000,0000,0000,,quantity should be.
Dialogue: 0,0:04:05.60,0:04:07.95,Default,,0000,0000,0000,,A quota is difficult.
Dialogue: 0,0:04:07.95,0:04:10.47,Default,,0000,0000,0000,,We don't have quite the right information.
Dialogue: 0,0:04:10.47,0:04:12.40,Default,,0000,0000,0000,,A tax is interesting.
Dialogue: 0,0:04:12.40,0:04:14.47,Default,,0000,0000,0000,,A tax says, "Look, regardless of
Dialogue: 0,0:04:14.47,0:04:16.20,Default,,0000,0000,0000,,what the marginal cost curve really is,
Dialogue: 0,0:04:16.20,0:04:19.29,Default,,0000,0000,0000,,we're just going to\Nshift it up by 2 cents."
Dialogue: 0,0:04:19.29,0:04:21.93,Default,,0000,0000,0000,,We saw that when we\Nfirst talked about taxes.
Dialogue: 0,0:04:21.93,0:04:24.53,Default,,0000,0000,0000,,When we first talked about\Ntaxes, we talked about
Dialogue: 0,0:04:24.53,0:04:26.62,Default,,0000,0000,0000,,they're introducing a dead weight loss
Dialogue: 0,0:04:26.62,0:04:28.88,Default,,0000,0000,0000,,because you're not\Nproducing as much quantity
Dialogue: 0,0:04:28.88,0:04:30.74,Default,,0000,0000,0000,,as you would have otherwise, or
Dialogue: 0,0:04:30.74,0:04:32.96,Default,,0000,0000,0000,,as much quantity isn't being consumed.
Dialogue: 0,0:04:32.96,0:04:34.67,Default,,0000,0000,0000,,But here, a tax could actually prevent
Dialogue: 0,0:04:34.67,0:04:36.95,Default,,0000,0000,0000,,a dead weight loss because if you have
Dialogue: 0,0:04:36.95,0:04:40.39,Default,,0000,0000,0000,,a 2 cent tax, essentially adding the cost
Dialogue: 0,0:04:40.39,0:04:43.07,Default,,0000,0000,0000,,of the negative externality\Nin the form of a tax
Dialogue: 0,0:04:43.07,0:04:46.14,Default,,0000,0000,0000,,on top of the supplier's\Ncost right over here,
Dialogue: 0,0:04:46.14,0:04:48.74,Default,,0000,0000,0000,,you are going to cause\Nthe equilibrium quantity
Dialogue: 0,0:04:48.74,0:04:51.37,Default,,0000,0000,0000,,to be the quantity where you're not
Dialogue: 0,0:04:51.37,0:04:53.74,Default,,0000,0000,0000,,generating all of this negative surplus,
Dialogue: 0,0:04:53.74,0:04:56.20,Default,,0000,0000,0000,,and it's just a positive side effect,
Dialogue: 0,0:04:56.20,0:04:57.34,Default,,0000,0000,0000,,and once again, this is all assuming
Dialogue: 0,0:04:57.34,0:04:58.54,Default,,0000,0000,0000,,that this is the right number,
Dialogue: 0,0:04:58.54,0:05:00.60,Default,,0000,0000,0000,,but it would be a positive side effect
Dialogue: 0,0:05:00.60,0:05:02.29,Default,,0000,0000,0000,,that you would also generate some revenue
Dialogue: 0,0:05:02.29,0:05:03.47,Default,,0000,0000,0000,,for the government.
Dialogue: 0,0:05:03.47,0:05:05.80,Default,,0000,0000,0000,,What's good about the\Ntax in this circumstance
Dialogue: 0,0:05:05.80,0:05:07.87,Default,,0000,0000,0000,,right over here, you're\Nnot assuming anything
Dialogue: 0,0:05:07.87,0:05:09.80,Default,,0000,0000,0000,,about what the marginal\Ncost curve looks like
Dialogue: 0,0:05:09.80,0:05:12.14,Default,,0000,0000,0000,,or what the demand curve looks like.
Dialogue: 0,0:05:12.14,0:05:13.68,Default,,0000,0000,0000,,As long as you're assuming that this
Dialogue: 0,0:05:13.68,0:05:14.62,Default,,0000,0000,0000,,is the right number,
Dialogue: 0,0:05:14.62,0:05:18.07,Default,,0000,0000,0000,,the tax will always shift whatever
Dialogue: 0,0:05:18.07,0:05:19.54,Default,,0000,0000,0000,,the marginal cost curve is,
Dialogue: 0,0:05:19.54,0:05:21.45,Default,,0000,0000,0000,,it'll always shift it to the right point
Dialogue: 0,0:05:21.45,0:05:26.37,Default,,0000,0000,0000,,to intersect wherever the demand curve is
Dialogue: 0,0:05:26.37,0:05:28.20,Default,,0000,0000,0000,,at this equilibrium point,
Dialogue: 0,0:05:28.20,0:05:29.53,Default,,0000,0000,0000,,that gives us an equilibrium price
Dialogue: 0,0:05:29.53,0:05:30.95,Default,,0000,0000,0000,,and an equilibrium quantity.
Dialogue: 0,0:05:30.95,0:05:32.62,Default,,0000,0000,0000,,So if this is the right number and
Dialogue: 0,0:05:32.62,0:05:34.40,Default,,0000,0000,0000,,you put a 2 cent tax per bag,
Dialogue: 0,0:05:34.40,0:05:37.28,Default,,0000,0000,0000,,a 2 cent tax per bag,
Dialogue: 0,0:05:37.28,0:05:40.38,Default,,0000,0000,0000,,then this is probably\Ngoing to be the best option
Dialogue: 0,0:05:40.38,0:05:43.70,Default,,0000,0000,0000,,in terms of optimizing the total surplus.