The Economics Book

IN CONTEXT

FOCUS

Economic policy

KEY THINKER

Arthur Pigou (1877–1959)

BEFORE

16th century London households are forced to pay for sewage cesspits in their own houses, rather than throw sewage into the streets.

AFTER

1952 British economist James Meade tells a fable of beekeepers who received no benefit from their bees pollinating nearby orchards, so stopped raising enough bees.

1959 British economist Ronald Coase argues that the way to cope with external costs is to focus on property rights so that pollution is owned and its costs negotiated.

1973 James Cheung shows the fable of the bees to be false since apple-growers and beekeepers do negotiate.

If a supermarket ...