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AS Economics HELP

What is Extension of property rights when the Government is trying to correct market failure?!?
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Hody421
15
Extending property rights provides cover for market failure. It is ubiquitously associated with properties which are difficult to control, for example the oceans,seas; and lakes. What the government does is give authority to owners of a certain area to be able to charge other people who use it without purposes.
It is basically done so that the supply does not run out. You can find out more here:
http://www.s-cool.co.uk/a-level/economics/market-failure/revise-it/other-reasons-why-markets-fail
I doubt you'd ever need to know this for the exam, Assuming you're with AQA.
It is an issue when it comes to 'missing markets' such as the market for pollution. Take the example of a factory producing SO2 (causes acid rain). It is not clear whether they have the right to release the pollution or whether we have the right to clean air. The government could ban emissions of SO2, tax the firm etc.

Another alternative would be to define whether we have the right to clean air or whether they have the right to emit SO2. In theory, it doesn't matter which as, even if the government gets it 'wrong' and gives the firm the right to pollute when it would be better if they didn't, then people will be willing to pay it not to (as if they would get enough benefit from cleaner air they would pay for it). The reverse is also true.

In reality this is unlikely to work as individuals find it hard to club together and buy the right for clean air. The government does something similar with tradable permits, however. Firms can buy permits to emit pollution. Anyone can buy these permits so if the public wants less pollution then they also can buy permits. Permits are also a very efficient way of reducing pollution.

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