Saturday, January 9, 2010

Negative Externalities in AP Microeconomics

Summary: Texting.

To give a deeper meaning t0 the graph, try tying the theory to texting while driving. The New York Times has a simulation here. The simulation, Gauging Your Distraction, measures reaction time when texting and compares the time to periods of non texting.

A negative externality exists when costs are pushed on to parties who are neither buyers of sellers of the good. In the neoclassical theory, people don't consider the costs that their actions impose on others. When all costs are considered, the social cost is greater than the private cost and less of the good is produced. In the graph, the socially optimal output is Q1 after all costs have been considered. This all sounds good, but how to you get students to actually understand it?

1. Find a volunteer who is good at texting and ask them to play the simulation. In this simulation only the top numeric keys can be used to change lanes and the mouse must be used to text. Students find this "unrealistic" at first, but quickly adapt with practice.
2. Let the student practice until she or he feels comfortable. While the student is practicing, ask the questions like, "How many of you text and drive?" "How many of you can text, drive, and eat?" "How many of you feel that texting and driving is more dangerous than just driving?" "How many of you have had an accident while texting and driving?" "Does anyone in this room disagree that texting and driving is more dangerous than just driving?" Asking these questions gives the volunteer plenty of time to practice.
3. A survey has shown that the average student receives and sends over 1,000 text messages a week. Now say, "Many states have made texting and driving illegal. Why?" Ask, "Would you agree that there are too many drivers texting and driving and this dangerous activity could result in harm to others?"
4. Begin the actual simulation. Just about everyone in the room will become a backseat driver. It was my observation that they all have an interest in the outcome since most routinely text and drive. After the simulation, discuss the results? I love to ask, "Did anyone see the gray lady on the side of the road?" This is a surprise to students. The National Highway and Traffic Association reckons that the most danger in texting and driving has to do with unexpected events such as a gray lady standing on the side of the road.
5. Now point out the intuitions of the curves. The MPC represents the individual's actions. He or she acted in a manner that considered only their costs and benefits. The MSB curve could represent everyone in the classroom who has texted while driving. It is subject to diminishing marginal utility. Finally, the MSC curve represents how a law could impose addition costs on those who drive. Perhaps drivers are fined or lose their license. Point out that at Q, the good is overproduced and at Q1 all costs have been considered.

When I used this plan, I had a great day. I had students that asked higher order questions like how enforcement might result in more arrests for texting but less in drunk driving. Suddenly, they were asking if airbags were a moral hazard that was like texting and driving. Many students wanted to try to see if they could do better than the volunteer.

If you use this simulation, you will find that your students will be engaged and remember the curves longer. I look forward to your comments.

About the Author: Mike Fladlien is an AP Economics teacher from Muscatine High School in Muscatine, IA. He is an author, and also publishes the Mikeroeconomics and iMacroeconomics VB blogs.


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