Externalities in the cashmere market: Colbert Report interview
and is replicated here as part of the SERC Pedagogic Service.
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).
Context for Use
- Course level: Principles of Microeconomics
- Could also be used in an upper-division Microeconomics course to review basic externality concepts
- Appropriate class size: Works for any size class
- Instructors of varying class sizes may choose different methods for assessing student responses to questions.
- Equipment: The instructor will need a computer with an internet connection and browser, connected to a projector and sound system. It would be helpful to have students using clickers to respond to questions; in smaller classes, students may be able to submit hand-written responses instead.
- Class time required: The video clip is 5 minutes and follow-up discussion of the graph and questions can take ten to fifteen minutes, depending on how much time is given to the students to work on the assigned questions. If the clip is used to brainstorm ideas for externality solutions, that can take up to ten more minutes.
- Previous skills/concepts students should already know: Before using this activity, it is assumed students know basic supply and demand, cost-benefit analysis, and have been introduced to externalities. The activity could also be used before externalities are introduced; if the video is shown with no prior knowledge of externalities, then the instructor can use the clip as an example of the concepts, rather than asking students to identify those concepts in the clip.
Description and Teaching Materials
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
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.
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.
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.