Many Countries Have Recently Imposed a Ban on Smoking in Public Areas, Including Restaurants and Bars.
Discuss whether an outright ban is necessarily superior to either a Pigovian or Coasian solution to the externalities created by smoking in public places.
Partial smoking bans have become increasingly popular in Western democracies in recent years and tend to revolve around the banning of smoking in public areas. This essay will explore economic arguments and solutions relating to the externalities caused by smoking. The central problem at the heart of this issue is the over-consumption of cigarettes and the problem that the externalities of smoking cause for the general public and therefore this essay will show that …show more content…
Fig. 2 – SMB < PMB (12Tamito’s Blog, 2013).
This type of situation creates a problem in which a particular good or service can be consumed at a greater level than would optimally be the case (Mankiw 2011: p.199). The consequence of this is that effectively the service or product in question is not priced at the correct level, because it is not priced high enough and the cost of the negative externalities relating to the product or service are not reflected in the price (Pigram & Jenkins 2013: p.172).
Pigovian and Coasian solutions to externalities
The Pigovian approach places the onus upon the generator of the externality (Hartman, 1997). In order to remedy the