Week 4: Assignment - Externalities

Grade: 100/100
These were two separate attachments, but are combined below.

Text Box: Positive Externality Negative Externality l Two scientists fight the pharmaceutical companies and conventional wisdom to go on to prove that ulcers can and are predominately caused by a bacteria. l They research to do this work is carried by grants and private and public sector monies. l The Scientists will continue to be able to work for the greater good of mankind by getting the prize money for the research completed from the Nobel prize as well as the notoriety. l Mankind is rewarded with not having to take a cocktail of medications that cost a great deal of money and have negative side effects. l There are implications on other difficult to treat stomach disorders that may be greatly impacted by their research. (Maugh, 2005) l States are reducing funds to public universities, and as a result the students able to attend are forced to work and still come out with large debts. l Costs are rising, with no real answer as to exactly what the money is being used for, although University officials argue that it is to the benefit of the student. l Students who get a degree often have large amounts of debt that can prohibit the ability of the graduate to get a home or open a small business due to the amount of debt occurred in college. l There is a decrease in the number of students getting non-vocational degrees, because of the lack of ability to get a job that pays well. (Katz, 2005) 

 
















References

Katz, R. (2005, October, 3). Rising tuition and the changing face of higher education. Retrieved on October 3, 2005, from http://www.mndaily.com/articles/2005/09/30/65395

Maugh, T. (2005, October 3). 2 Australians Win Nobel Prize for Medicine. Retrieved on October 3, 2005, from http://www.latimes.com/news/nationworld/world/la-100305nobel_lat,0,7231102.story?coll=la-story-footer&track=morenews

 

Positive and negative externalities present themselves in every facet of the economic market place.  Even things that seem to be innocuous have impacts that ripple in some other area of the economy.  Two such examples are shown in articles that discuss the newest Nobel Prize winners and in the rising cost of higher education.

 

Two scientists in Australia win the Nobel Prize for changing the face of ulcer treatment, and discovering a cure for most ulcer sufferers is as simple as taking an antibiotic.  This amazing discovery had some very positive externalities.  Many people suffered over long periods of time with the pain and discomfort of ulcers.  As a result of the pain, they took many medications to help neutralize stomach acid, which was a boon for pharmaceutical companies.  These two scientists, armed with a few biopsies noticed that a bacterial infection was present in almost every biopsy that they reviewed.  When trying to share this information they were laughed at, and scoffed, because no one believed that bacteria could live in such a hostile environment.  It took extreme effort on their part to be heard, but for the sake of those suffering they continued and were proved correct.  (Maugh, 2005)

 

The impact on the economy was not purely positive.  As a result of the cure, many pharmaceutical companies lost money on long term treatments for ongoing stomach pain.  However, because of the research, many other doors have been open as far as curing diseases such as Crohn's disease, ulcerative colitis, rheumatoid arthritis and atherosclerosis, which may have a similar bacterial cause.  The benefit to humans far out weighs any economic impact to the pharmaceutical companies.  Also, the research comes out of public funds in many cases, and certainly it was beneficial to society to have an inexpensive cure to such a common ailment as opposed to expensive treatments only.

 

On the other hand, decreases in funding of higher education, as well as the rising costs of getting a college degree, are leading to some very negative externalities.   Many students are unable to attend college, and those that are able, spend many hours working at jobs that must pay higher than minimum wage in order to be able to match the cost of their education.  No longer are students who work to fund their education in a position to take advantage of many of the more leisure activities of college.  Furthermore, there has been a significant drop in non vocational degrees because students are interested in finding a job that they can pay massive college debts off after getting their degree.  (Katz, 2005)

 

Besides the negative impact on students, the economy at large also suffers from the debt that these students take on in order to complete their degree.  Many bright graduates will be unable to start a small business or even purchase a home because of the severe impact on their new credit.  This will impact society both in ideas and markets that are left untapped from great ideas being sidelined, as well as preventing active members of society from being able to share in the joy of home ownership.  
References

Katz, R. (2005, October, 3). Rising tuition and the changing face of higher education.  Retrieved on October 3, 2005, from http://www.mndaily.com/articles/2005/09/30/65395

Maugh, T. (2005, October 3). 2 Australians Win Nobel Prize for Medicine.   Retrieved on October 3, 2005, from http://www.latimes.com/news/nationworld/world/la-100305nobel_lat,0,7231102.story?coll=la-story-footer&track=morenews



© Erik Smith 2005
Licensed under the GNU Free Documentation License