- Macro & Microeconomics
- Scientists have discovered that dog ownership improves the health of families (see http://kb.rspca.org.au/what-are-the-health-benefits-of-pet-ownership_408.html . Hence, governments want to encourage dog ownership. This is an example of an externality.
Scientists have discovered that dog ownership improves the health of families (see http://kb.rspca.org.au/what-are-the-health-benefits-of-pet-ownership_408.html . Hence, governments want to encourage dog ownership. This is an example of an externality. Essay
DOG OWNERSHIP 9
Dog Ownership Externalities and Government Interventions
The Nature of Externalities and the Difference between a Positive and a Negative Externality
Externalities take place in an economy when the consumption or production of certain goods influences the third party which is not directly associated with the consumption or production. Externalities normally result in government interventions. Externalities can be divided into positive externality and the negative externality, whereby the former brings forth good effects on the people whereas the latter brings about bad effects. Basically, an externality arises when a transaction’s third party start experiencing side effects (that can positively or negatively affect them) because of a transaction between a seller and buyer. Positive externality happens when the third party benefit from the transaction while negative externality ensues when a cost is incurred. Dog ownership has some positive externalities; for instance, it reduces the obesity risk as well as early signs of diabetes amongst the young people. To the third party, dogs can induce positive effects as an anti-depressant for the majority of the aged person in terms of companionship. For dog ownership to become a positive externality, the private benefit that the owner enjoys from buying it should be surpassed by the benefits to the entire society.
Dogs can be beneficial to the society in terms of security by keeping robbers and other malicious people away from the community. Besides that, dogs can help people in the society become physically active since they are personal trainers and great motivators (RSPCA Australia, 2015). Besides that, dog ownership increases social connectedness. On the other hand, a negative externality comes about when the third party incurs some costs because of a transaction between a seller and a buyer. Dog ownership can have negative externality; for instance, barking outside all the night can deprive the neighbours some valuable sleep. Furthermore, dog owners that allow their dogs to mess around in public places and failing to clean up after the dogs can result in the spill over costs (negative externalities). Allowing the dogs to mess around can inflict harm on the people (Somin, 2013). According to Federal Reserve Bank of St. Louis (2017), negative externalities can be discouraged by the government through taxation of goods and services which lead to spill over costs. Besides that, the government could promote positive externalities through subsidisation of goods and services that bring forth spill over benefits.
Why Governments Would Intervene In the Market for Dogs Using Externality Theory
Given that the dog owners do not bear the spill over costs attributed to the noise made by their barking dogs, the government can intervene by imposing disturbing the peace laws. Clearly, governments can utilise numerous techniques to promote positive externalities and reduce negative externalities. In the market, the quantity of goods that have negative externalities is higher while the quantity of those having positive externalities is below what is deemed socially desirable, given that people enjoying the product’s benefits are not market participants and therefore, they do not influence the market quantity. Such situations can be remedied by the government through taxation of the taxing products that have negative externalities as well as subsidisation of products having positive externalities. According to Welker (2012), negative externalities can lead to market failure because of the exploitation of the commons. When the market is unable to realise an output level that is socially optimal, through which the benefits, as well as costs not only of the individual producers and consumers, are taken into account, but also all health, environmental and social benefits and costs are accounted for, the government could successfully enhance the market outcome through interventions. According to Matisoff and Noonan (2012), dog parks closely fit into the commons’ neighbourhood model because of the resource management, the shared nature of the resources, as well as the possibility of physical degradation because of overuse, overcrowding, and the challenges associated with maintaining conditions that are safe for all the users. Assuming that every person that have a dog to facilitate their security are within the limits of plausible rationality; all dog owners would then try to maximise their benefits related to owning a dog. Such benefits include companionship, increased security, improved social life, increased physical activity, and many others. The positive component of dog ownership is the array of benefits related to dogs while the negative component is noise pollution. These people justify their dog ownership by arguing that the negative externalities generated because of their actions are shared among various stakeholders, whereas they accrue nearly all the positive benefits associated with dog ownership.
These instances, according to Jain (2017), entail the exploitation of the commons and require government interventions. In many urban areas, dog owners normally frequent the available parks which are also frequented by skateboarders, homeless people, families, and young people. According to Foster (2011), there is a high probability that an intense rivalry will ensue between such users if the local government fails to section the park into identifiably different areas. Basically, compatibility and coexistence can happen by enforcing rules and regulations. Normally, many towns have local regulations designating the place, time, place, as well as how to utilise the parks and other open spaces. Such regulations, according to Foster (2011), could either codify or facilitate the creation of customary usage practices. In a scenario where dog owners start frequenting parts of the park where children, as well as families, are spending quality time and fail to leash their dogs or clean up after them, a conflict would likely arise. When many groups of persons intensify their park use, there will be an increase in the costs of users while a small class of users would benefit. When do users are allowed to frequent parks any time of the day, the y could drive out other users; thus, leading to a rivalry that consequently generates the possibility of the park degrading because of high lawlessness and reduced cleanliness. Restoring the parks into a state of equilibrium between uses and users would need government interventions (Foster, 2011).
One Type of Intervention That Governments Can Use To Encourage Dog Ownership
To encourage dog ownership, the government introduce education and awareness program that would help raise awareness of the benefits associated with dog ownership. Thorough exploration is the potential mechanisms for making this intervention successful and making sure that such messages get to the right people. The government should make sure that advice and information and are accessible to both dog owners as well as other people desiring to become dog owners. The advice and information offered will address means of caring for the dogs and how to achieve the benefits associated with dog ownership. As mentioned by Colchester Borough Council (2012), formulating a communications Strategy is very imperative since it facilitates the communication of key messages through different media platforms. In Mills and Hall (2014) study, they observed that there is a growing need for benefit of dog companionship to be acknowledged in the boarder educational setting. Given that the word ‘dog’ is amongst the most common words in children’s vocabulary, integrating the importance of dog ownership into the children curriculum can motivate parents to buy dogs for their children; thus, increasing fog ownership. Through the education and awareness program, the government can demonstrate to parents that dog ownership can lead to higher autonomy amongst the children and can also improve their self-esteem and self-concept.
Supply And Demand Diagram the Private Market for Dogs
In the private market, the supply of dog is exceedingly higher as compared to the demand. In Australia, for instance, 39 per cent of households own a dog. That is to say, there are 19 dogs for every 100 people In Australia (RSPCA Australia, 2016). As demonstrated in the supply and demand diagram below the demand of dogs is largely influenced by the market price. The prices of dogs are exceedingly higher; for instance, a dog in the private market range between $0 and $25,000, but additional expenses is what makes dog ownership exceedingly expensive. To register a desexed/undesexed is between $40 and $150; Desexing costs $200 to $500 but depends on the gender, age, and size of the dog. Furthermore, worming and flea treatment cost between $120 and $300, while Microchipping and Puppy vaccinations cost approximately $60 and more than $170, respectively.
Government intervention would positively influence the quantity traded as well as the price of the dogs. In this case, the government can promote positive externalities through subsidisation so as to lower the cost of dog ownership, which could consequently increase both the supply and demand of dogs. Without a doubt, when the government offers a demand-side subsidy to the people, they get encouraged to buy that product. Therefore, reducing registration fees and cost of dog maintenance would practically lead to increased dog ownership. Given that people will pay less to have a dog the demand would increase. As evidenced in the diagram below, government intervention would lead to increased dog ownership; for instance, at a $ 175, the quantity demanded would be 150 dogs while the quantity supplied will be only 75 dogs. Before government intervention, at a $175, the quantity demanded was 112 dogs while the quantity supplied was also 112 dogs. This demonstrates that government intervention in the private market leads to increased demand and reduced supply.
Colchester Borough Council. (2012). Responsible Dog Ownership Strategy. Essex, England: Colchester Borough Council.
Federal Reserve Bank of St. Louis. (2017 ). Externalities — The Economic Lowdown. Retrieved from Federal Reserve Bank of St. Louis: https://www.stlouisfed.org/education/economic-lowdown-podcast-series/episode-11-externalities
Foster, S. R. (2011). Collective Action and the Urban Commons. Notre Dame Law Review, 87(1), 57-134.
Jain, P. (2017 , February 10). 4 Types Of Market Failures That Require Government Intervention. Retrieved from The Huffington Post India: http://www.huffingtonpost.in/pranav-jain/4-types-of-market-failures-that-require-government-intervention/
Matisoff, D., & Noonan, D. (2012). Managing contested greenspace: neighborhood commons and the rise of dog parks. International Journal of the Commons, 6(1), 28–51.
Mills, D., & Hall, S. (2014). Animal-assisted interventions: making better use of the human-animal bond. British Medical Journal, 174(11), 1-15.
RSPCA Australia. (2015, November 4). What are the health benefits of pet ownership? Retrieved from RSPCA Australia: http://kb.rspca.org.au/what-are-the-health-benefits-of-pet-ownership_408.html
RSPCA Australia. (2016, February 17). How many pets are there in Australia? Retrieved from RSPCA Australia: http://kb.rspca.org.au/How-many-pets-are-there-in-Australia_58.html
Somin, I. (2013 , January 26). The Law and Economics of Dog Poop Externalities. Retrieved from The Volokh Conspiracy: The Law and Economics of Dog Poop Externalities
Welker, J. (2012, January 11). The Tragedy of the Commons as a Market Failure. Retrieved from Economics in Plain English: http://welkerswikinomics.com/blog/2012/01/11/the-tragedy-of-the-commons-as-a-market-failure/
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