Carrot or stick? Correcting market failure

Here is an article that would be perfect for explaining two different ways of reducing the negative externalities associated with landfills.

The Stick

Throwing rubbish into landfills produces many negative externalities including the production of greenhouse gasses. One way to solve this problem is introducing a landfill tax which aims to charge people for the rubbish they create.

The Carrot

The conservatives believe a better solution would be to pay families who recycle rubbish. A pilot scheme in Maidenhead has seen recycling increase by 30 per cent with the average household on course to receive £130 a year.

A possible classroom activity would be to split the class into two and ask them to debate the pros and cons of each solution. Click read more for some GCSE style questions on market failure.

1. Explain what is meant by market failure (2 marks)
2. Explain two ways in which landfills produce negative externalities. (4 marks)
3. Discuss possible solutions to reducing the negative externalities associated with landfills. (8 marks)