When I went downtown the other day, I was greeted by the roar of airplanes that were flying surprisingly close to the skyscrapers of downtown Chicago. I immediately knew that it was the annual Air & Water Show, which takes place every August in Chicago.
I understand the Air & Water Show is a big event that draws people downtown to watch the spectacle of planes doing tricks and flying in formation, but I had to wonder how the show affected workers downtown. People were undoubtedly working on a Thursday afternoon at 1:30 pm. Yet, this was a time when planes noisily swooped past these offices and weaved in and out of skyscrapers. If I were a high-powered executive with a deadline, I don't think I would be happy that the Air Show was flying by my window.
On the other hand, there were plenty of tourists roaming the streets who got to enjoy a free air show. It may have been a good thing for them.
In economics, these costs and benefits that are experienced by bystanders are called externalities. If it is a bystander cost, it is a negative externality; if it is a bystander benefit, it is a positive externality. Externalities are a form of market failure. That is, we don't expect the market will produce the right amount of good that has an external benefit or cost. That's because individuals account for private benefits and costs (not external) when making their decisions. At the end of the day, the market produces too much of products that have negative externalities and too little of products that have positive externalities.
So, that brings me to the poll question of the week.
For you, is the Air & Water Show a positive externality or a negative externality?
As with all polls, this one is open for a week. Vote early, often and on the sidebar. Tell your friends and Blue Angels to vote. You should even tell your noisy neighbor if he can hear you over the noise he's making. Whatever you do, please vote. I'm interested in hearing what you have to say.