Abstract
Introduction
When market fail to allocate resources efficiently then market failure occurs. Existence of externalities and public goods are the commons reason for market failures. Government through regulation, taxes, and subsidies can overcome or reduce the negative impact of these distortion of economic efficiency (Salvatore, 2003).
The six core values of Saint Leo are Excellence, community, respect, personal development , responsible stewardship and integrity. But here we apply the value of responsible stewardship. The main purpose of this value is to ensure the efficient and sustainable use of the natural world and to provide social justice by ensuring benefits, equally and fairly from the wealth of natural world. The pollution in the environment is an example of negative externality (Bradley, Dr. Anne, 2012). But what is this externality? Let us discuss about externality.
Externalities
In the course of producing and consuming commodities, harmful and beneficial side effects arise that are borne by firms and people not directly involved in the production or consumption of the commodities. These side effects are called externalities. Externalities are called external cots when they are harmful and are external benefits when they are beneficial. An example of external cost is air pollution that may accompany the production of commodity while an example if external benefit is the reduced chance of the spreading of a communicable disease when an individual is inoculated against it. But as we know that perfect competition leads to maximum economic efficiency and Pareto Optimum and this is true only when private costs equal to social costs and again private benefits equal social benefits(Salvatore,2003). Again externalities arise when there is a property right. For example in the case of a firm polluting the air. Neither the firm nor the people living next to the firm own the air. That is, the air is common property(Lee, Dwight R & Clark, J.R, 2013). Since no resident owns the air no one can sue the firm for damages resulting from air pollution generate by the firm, so externalities arise when property rights are not adequately specified.
Public Goods
Another market failure occur due to public goods. If the consumption of a commodity by one individual does not reduce the amount available for others then the commodity is a public good. The example of public goods are national defense, law enforcement, fire and police protection, education and flood control. Government plays various roles in modern societies. These roles range from the provision of public goods, to the redistribution of income, regulation of monopoly and pollution control( Salvatore, 2003). Such failure is even in the environment.
Environmental Pollution
Environmental pollution like air, water, thermal, scenic and noise they arise due to unclearly defined property rights and too high transaction cost. The optimum level of pollution from society's point of view cannot be zero but it is given by the level at which the marginal cost of pollution to society is equal to the private and social marginal benefit of disposing of waste by the cheapest method available. The government can achieve the optimal pollution by direct regulation or effluent fees. One way to regulate the effluent fees to reduce pollution is by the sale of pollution rights by the government. Under such a situation government determine the amount of pollution that it thinks is socially tolerable and the auctions off the licenses to firms that generate pollution up to a specified amount. The responsible stewardship plays a role in reducing the pollution and many brings better performance (Lee, Dwight R & Clark, J.R, 2013). The practice emphasizes on the use of renewable, nonhazardous and recyclable materials. Many companies like Hewett Packard and Dell Inc have implemented recycling and are famous for it. Government have also implemented to restore our natural resources like Environmental Protection Agency(EPA) which came into existence in 1977 was the first transferrable permit for dumping. Then clean air act of 1990 required a phased reduction in overall pollution and established a generalized market for pollution permits.
Conclusion
Government emphasized on private property protections and free market for environmental improvements. Even though implemented but there are problem in setting the right tax so that private cost is equal to social cost. Again, if pollution taxes are raised in one country then the companies may shift to other countries to lower taxes and increase profits. But this is not the solution for reducing the global pollution. Taxes in de-merit goods like cigarettes which are harmful for the society may have negative effect on the low income group consumers and widen the inequalities of income. There are other types of ways of controlling pollution from the cars alike reducing the gas emissions i.e. CO2 in the environment (Bradley, Dr. Anne, 2012),. Better roads and more taxes for also implemented to reduce the level of pollution. There are laws of banning smoking in public areas. Even though there are lot of actions taken by the government but they have failed in resolving the market failures. So government actions are not the only solution to stop environmental solution but we need to be more conscious of our environment and be responsible to stop polluting our environment . We should apply Saint Leo's values along with Responsible Stewardship in our lives like of Personal Development and Integrity to have a better environment.
References
Salvatore, Dominick (2003). Microeconomics Theory and Applications. Oxford University Press.
Bradley, Dr. Anne, (2012, March 2nd). Understanding Economics as Stewardship. Retrieved from https://tifwe.org/understanding-economics-as-stewardship
Lee, Dwight R & Clark, J.R, ( 2013, Spring/Summer). Market Failures, Government Solutions, and Moral Perceptions – CIAO, 33(2). Retrieved from https://www.ciaonet.org/attachments/26443/uploads
Core Values-Saint Leo University. The First Florida Catholic University. Retrieved from www.saintleo.edu/about/florida-catholic-university.aspx
Appendix
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