Download eia-lesson 6

THE MARKET FAILURES
AND ECONOMY OF THE
ENVIRONMENT
The enviromental limits
of private intitiative
1. PRIVATE COST AND SOCIAL COST
1.1 The decisions of the enterprises in
presence of social costs
1.2 Individual and social capital
1.3 Demonstrating
1.4 Failures of the market
1.5 Public property
2. DECISIONS OF MARKET AND SOCIAL
DECISIONS
3. OWNERSHIP RIGHTS
4. PROPERTY TYPOLOGIES
4.1 Pure private property
4.2 Almost private property
4.3 Almost public property
4.4 Pure public property
FAILURES OF THE MARKET AND
ECONOMY OF THE ENVIRONMENT
The enterprises decide
the quantity of production
buying marginal costs
The enterprises have therefore
An incentive to economize resources
to be efficient !
FAILURES OF THE MARKET AND
ECONOMY OF THE ENVIRONMENT
When the enterprise uses resources, it
does not cost only for itself
(private costs), but for the whole
collectivity (social costs) under forms
of polluting emissions that produces
environmental damages.
But the enterprise doesn't have, in an
economy market pure, some incentive to
take care of the social costs.
Many environmental property can be
freely used without paying any price and
therefore they are not subject to the
economization.
If the most profitable technologies for the
enterprise are the more polluting, it will
choose them, and this is not quite perfect
from the social point of view!
We have a problem of
DEMONSTRATING
FAILURE OF THE MARKET
In an economy of market, the resources
that don't have a price, are not used in
efficient way. Besides, tropes are taken
place
NEGATIVE and
too little demonstrating
and POSITIVE demonstrating
The DEMONSTRATING as collateral and in
deliberate effects of the production and of
the consumption, which revert on different
subjects responsible of the action of
production or consumption.
The resources that don't have price are
PUBLIC PROPERTY
Used in inefficient way from the market
Public property is in fact
characterized by :
. Joined consumption
. Not exclusion
For these property every one enjoys
full benefit of use while The costs are
supported by community.
There is no incentive to economize
the use
To use the enviromental resources
efficiently, it is necessary to let who uses
the resource “bear the load” of the social
costs that produces.
By this they can reconcile a profit and social
capital.
For the enterprise
IT IS WORTH THE RULE OF MARKET
DECISION
prescribes the production until (profit) the
MARGINAL PROFIT (price)
is not equal to the marginal cost
According to
THE RULE OF SOCIAL DECISION
The polluter pays the damages to
incorporate the social cost in its private
costs
A push to economize the resource
Difference between the private and social costs
is given by
DEFECTIVE DEFINITION OF THE
OWNERSHIP RIGHTS
If the ownership is well defined, the owner
can exclude the others from the use and he is
the only one to enjoy some benefits
A stimulation to economize property
PRIVATE PURE PROPERTY
Exclusive and divisible
. It is subject to rivalry in the
consumption
. It goes to the exclusion easily
you/he/she can acquire it and can be
sold on the market and therefore
evaluated through the price.
ALMOST PRIVATE PROPERTY
Not exclusive but divisible
. There is rivalry in the consumption
. The non exclusiveness creates problems of
commune ownership (e.g. reserve of fishing)
The non exclusiveness blocks the recourse to
the market and therefore the economic
evaluation must be indirect.
ALMOST PUBLIC PROPERTY
Not exclusive and partially divisible
. Problems of accumulation and excessive
exploitation (e.g. Public beach)
Necessity of evaluations of indirect
market
PURE PUBLIC PROPERTY
Not exclusive or divisible
. Absence of rivalry in the consumption
. Impracticable exclusion
Difficult economic evaluation also with the
principle