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Externalities in the cashmere market: Colbert Report interview

This page authored by Jennifer Imazeki, San Diego State, based on video clip of interview with Evan Osnos on The Colbert Report, Comedy Central.
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This material is replicated on a number of sites as part of the SERC Pedagogic Service Project

Summary

In this interactive lecture, students watch a video clip from The Colbert Report of an interview with Evan Osnos. Osnos describes the pollution externalities (dust) created by cashmere goats in China. Students then graph the market for cashmere, showing the externality, using the think/write-pair-share technique. Students will differentiate between the private and social costs in the market for cashmere, generate a graph that shows the private equilibrium in the market and the socially efficient equilibrium, and brainstorm ways to move the market to the socially efficient equilibrium (providing material for additional discussion of externality solutions).

Learning Goals

Negative (or cost) externality, external costs, social costs, private market equilibrium, socially-efficient equilibrium.

Context for Use

This is an interactive lecture segment, with the video clip serving as an engagement trigger.

Description and Teaching Materials

Student tasks: Identify externality, graphically illustrate externality
Interactive techniques: Think-pair-share, write-pair-share, conceptest, brainstorm

The instructor first lectures on externalities and shows the students how to draw the graph with private and social costs and benefits. Students then watch a video clip from The Colbert Report of an interview with Evan Osnos http://www.colbertnation.com/the-colbert-report-videos/90626/july-30-2007/evan-osnos. In the clip, Osnos explains that cashmere goats in China have sharp hooves that tear up the landscape and create dust, which then travels to the United States and reduces air quality, particularly along the west coast. As cashmere consumption has increased, so has the pollution. Osnos refers to the "real costs" of cashmere items (such as a cashmere toilet seat cover that Colbert has) as including the health care costs for those affected by the dust.

After watching the clip, ask the students to identify the externality in the market for cashmere. Then ask students to graph the market for cashmere, showing the external costs and identifying the private and social equilibrium in the market. Students should be given a few minutes to generate the graph and then given a few a more minutes to share their graphs with a neighbor and revise as necessary. Then ask one of the small groups to provide an explanation of the graph (i.e., write-pair-share). Finally, ask students to brainstorm ways to move the market to the socially efficient (lower quantity) equilibrium. You can do this as another think-pair-share exercise or simply round-robin answers or ask for volunteers. Record their answers and use them as the starting point for discussing private and government solutions to externalities.

Teaching Notes and Tips

I started out using this activity as an introduction to the topic of externalities (i.e., show the clip, ask students to identify the external costs, but I draw the cashmere market graph for them, showing private and social costs and the private and social equilibria). However, I prefer to use it after they have already seen the graph at least once (i.e., I lecture on externalities and show them what the graph looks like in general, then show the clip and ask them to do the graph themselves), because it gives the students an opportunity to draw the graph themselves. In a very large class, I do the 'share' part of the activity by asking a student to describe his/her graph to me and I draw it on the document camera whiteboard for everyone to see. During the solutions brainstorming session, as I write down student suggestions, I try to group them according to type of solution (private/Coasian, command and control, market-based) and then I use those lists to introduce the fact that we will be spending the next few class periods discussing those types of solutions in more detail.

Assessment

Because I teach a very large class, I assess the students with clicker questions. Immediately after showing the video clip, I ask the multiple-choice question:
What is the externality in the market for cashmere?
A. Stephen's cashmere toilet seat cover
B. Americans buy too much cashmere
C. Cashmere-producing goats create dust that lowers air quality in the U.S.
D. Cashmere sales have tripled in the last decade.
[answer: C]

After having students draw their graphs, but before discussing what the graph should look like, I ask the multiple-choice question:
According to your graph:
A. social cost exceeds the social benefit at the private market equilibrium.
B. social benefit exceeds the social cost at the private market equilibrium.
C. social benefit exceeds the private benefit at the private market equilibrium.
D. private cost exceeds the private benefit at the private market equilibrium.
[answer: A]

Without clickers, these questions could still be used, with students responding by show of hands, with colored cards, etc. In small classes, instructors could collect the graphs from students.

References and Resources

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