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in this video were gonna discuss cap-and-trade so cap-and-trade is a system of marketable permits that is used to address negative externalities so I want to give you a specific negative externality lets talk about pollution and in particular well talk about sulfur dioxide emissions so sulfur dioxide leads to acid rain and acid rain can kill fish and insects and so forth so lets say its killing fish in a nearby stream and that there are people who fish in that stream and catch that fish and so now a cost has been imposed on them right so lets say that the factory that is producing electricity or whatever they are creating this sulfur dioxide with their production its creating acid rain its killing the fish and imposing costs on the people who do the fishing and so thats the nature of the negative externality and so theres going to be a market failure in that theres gonna be more sulfur dioxide produced than what is socially efficient and so cap-and-trade says well were gon
