Market failure helppp - short answers (1 Viewer)

[choiyokbao]

Explain two causes of market failure in the allocation of environmental resources

thanks in advance, i suck at environmental issues..

 

[RishBonjour]

lol. hate this topic.
because market works under price mechanism (supply/demand) because environmental resources lack a definite supply, particularly those such as water/air, they are significantly undervalued. (only when they start getting scarce - or are speculated to be scarce - their prices increases e.g. petrol)
Also, the tragedy of the common stuff - they don't have ownership. --> get over used
also free riders --> these knts exploit environmental resouces .

 

[jeffwu95]

free riders and difficulty in establishing property rights i think environment can suck my balls

 

[clarg]

1. Poorly defined property rights result in 'The Tragedy of the Commons', whereby community-pool resources, both renewable and non-renewable, and harvested at a rate unsustainable w/ regards to the goal of intergenerational equity. Private cost fails to consider the externalities of poor intergenerational equity, as well as the decreasing supply of a particular resource raising prices.

2. Pollutive production, i.e. the emission of CO2 by big business. The emission of CO2 harms the environment both through global warming and acid rain, amongst other things. Cost borne by society, rather than the producer, except in the case where a tax has 'internalised the externality'.