Slide 11 of 16
Notes:
An individual’s recourse in the matter of a negative externality is usually a civil law suite such as the one filed by airline stewardesses against the tobacco companies in 1997. Lawsuits can be very expensive for individuals and society but they are a means of recovering damages imposed by another’s use of their private property.
Aug, 1996, FDA classified nicotine as a drug and proposes increased regulations on the tobacco industry to reduce the incidence of teen age smoking. This FDA action precipitated the law suites filed against tobacco companies to recover costs associated with treating smokers under the Medicare and Medicaid programs. All of this in response to a negative externality.
The recent outcries by some citizens of North Carolina and the national news media stem from a perceived negative externality. Some people are accusing the swine industry of N.C. of contaminating their ground water supplies with excess levels of nitrogen. Others are claiming that the odor from swine facilities has decreased the value of their homes and land resources that they own. As a result, calls for new legislation have surfaced. The N.C. legislature in 1997 considered a two-year moratorium on the building of any new swine facilities until research studies could document any problems or not.
