《Economics from Miss Chen》Chapter 10.ppt

Chapter10EconomicsandEnvironment,10.1ENVIRONMENTALPROBLEMS,ReasonsforReluctancebecauseofbenefit,itisdifficulttodemandthatpeopleindevelopingcountriesshouldgiveupeconomicopportunitiesforthesakeoftheenvironment.becauseofindividualfreedom,governmentsarereluctanttotellconsumerswhattobuyandproducershowtoproduce.disagreementaboutthelevelofenvironmentaldamageanddisagreementaboutthebestwaytolimitorpreventit.,EnvironmentalDebates,ViewsaboutEnvironmentalIssuesIntergenerationalequitythegoaloftryingtomakesurethatfuturegenerationshaveaccesstoresourcesandthenaturalwouldtoatleastanequalextenttothatofcurrentgenerations.environmentalcapitalsustainabledevelopment,10.2MARKETFAILUREANDEXTERNALITIES,Marketfailurethesituationthatariseswhentheactionsofsomepeopleadverselyandsignificantlyaffectothersinoneormoreways.Theinabilityofsomeunregulatedmarketstoallocateresourcesefficiently.,Externalities,Externalitysomethingthatresultfromtheactionsofapersonorpersons,thataffectotherswhoarenotpartiestotheoriginalaction.onepartyundertakinganactiontogainabenefit,whileanotherpartyhastobearsomecostassociatedwiththataction.Negativeexternalitythecostthattheotherpeoplehavetocarry.Positiveexternalitywithoutsomeformofinterventionormarketadjustment,theproducersineachcasesdonotpaythatcost.Summarize:thegovernmentcaninternalizetheexternalitybytaxinggoodsthathavenegativeexternalitiesandsubsidizinggoodsthathavepositiveexternalities.,10.3ENVIRONMENTALPOLICIES:DEALINGWITHEXTERNALITIES,1.Regulationgovernmentcanremedyanexternalitybymakingcertainbehaviorseitherrequiredorforbidden.apolitically,scientificallyoreconomicallyoptimallevelofactivity.,2.TradeableRightsandPermits,thesecouldbesoldatafixedpricetoeachoftheproducersoramoremarketorientatedapproachwouldbetoauctionthemtothehighestbidder.thisgivesfirmstimetoadjustandgivesthemmoremanagementfreedom.,3.IncentivesandDisincentives,thegovernmentcouldpersuadeconsumerstochangetheirbehaviorandthiswouldthensendamarketsignaltoproducerstobeenvironmentallyfriendly.,4.GreenTaxes,PigovianTaxataxenactedtocorrecttheeffectsofanegativeexternality.ArthurPigou,1877-1959Compare:Regulation:notexceed18litres/wkGreenTax:$20foreachtonofpaper,Preference,Taxisjustaseffectiveasaregulationinreducingtheoveralllevelofpollution.Thehigherthetax,thelargerthereductioninpollution.Taxreducespollutionmoreefficiently.Itplacesapriceontherighttopollute,whichallocatespollutiontothosefactoriesthatfacethehighestcostofreducingit.Taxisbetterfortheenvironment.Underthecommand-and-controlpolicyofregulation,thefactorieshavenoreasontoreduceemissionfurther.Bycontrast,taxgivesthefactoriesanincentivetodevelopcleanertechnologies,becauseitwouldreducetheamountoftaxthefactoryhastopay.Conclusion:Unlikeothertaxes,e.g.incometax,distortincentivesandmovetheallocationofresourcesawayfromthesocialoptimum.Taxraisesrevenueforthegovernment,alsoenhanceeconomicefficiency,thebystanderswhoareaffectedarealsobecared.,5.NegotiationandPrivateBargains,Coasianbargainsmostefficientmeansofachievingasocialoptimumwasforthewinnerstocompensatethelosers.Coasetheoremthepropositionthatifprivatepartiescanbargainwithoutcostovertheallocationofresources,theycansolvetheprob