Great example of a product with positive externalities

Examples of negative externalities are easy to discuss as the students intuitively understand the issues surrounding pollution. But it is often not as easy to give examples of positive externalities. Here is a cracker though….

A California company is selling a “smog-eating” concrete tile roof that it says neutralizes the nitrogen oxides spewed by automobiles.

Boral Roofing says each year, one of its concrete tile roofs on a typical 2,000-square-foot house can break down the same amount of nitrogen oxides as a car’s engine typically produces during 10,800 miles of driving. When sunlight hits the roof, it activates titanium dioxide, which breaks down the nitrogen oxides in the air into oxygen and nitrates.

The tile adds about US$800 to the cost of an average house and so the question is (as with all externalities) whether or not the government will intervene to achieve a more socially desirable output level of these roofs. Is a subsidy in order? Perhaps regulation that all new houses should be fitted with these tiles? Enjoy the discussion!

The original article can be found here.