Book contents
- Frontmatter
- Contents
- Preface
- Acknowledgments
- Part One The Internalization of Externalities as a Central Theme of Environmental Policy
- Part Two Strategies for Internalizing Externalities
- Part Three Standard-Oriented Instruments of Environmental Policy
- Part Four Extensions of the Basic Environmental Economics Model
- Part Five International Environmental Problems
- Part Six Natural Resources and Sustainable Development
- Epilogue: Three Types of Externality and the Increasing Difficulty of Internalizing Them
- References
- Index
Epilogue: Three Types of Externality and the Increasing Difficulty of Internalizing Them
Published online by Cambridge University Press: 05 June 2012
- Frontmatter
- Contents
- Preface
- Acknowledgments
- Part One The Internalization of Externalities as a Central Theme of Environmental Policy
- Part Two Strategies for Internalizing Externalities
- Part Three Standard-Oriented Instruments of Environmental Policy
- Part Four Extensions of the Basic Environmental Economics Model
- Part Five International Environmental Problems
- Part Six Natural Resources and Sustainable Development
- Epilogue: Three Types of Externality and the Increasing Difficulty of Internalizing Them
- References
- Index
Summary
This book's readers have accompanied the author on a long journey through the (sometimes impracticable) terrain of environmental economics. Many thanks for your company: without you (or, more exactly, without the vision of an addressee), I could not have managed it. In conclusion (as a reward?!), we offer you a bird's-eye view of our journey.
The simplest models in economic theory contain only households and firms as actors. The households aim to maximize utility. In doing so, they decide on their demand for consumer goods and the supply of production factors (especially labor) they offer. The objective of firms is seen as profit maximization. They can approach this objective in their role as suppliers of end products and demanders of factors of production. The activities of the individual households and firms are coordinated through markets. On certain conditions, the market mechanism is an extremely efficient instrument for coping with scarcity problems. One (of the many possible) complication(s) is that although many of the economically relevant relations among the actors are market relations, not all of them are. Often, the activity of one decision maker will affect the situation (the welfare) of another decision maker, without the market being the mediating mechanism. Such processes outside the market are called “externalities.” The literature of economics has shown that externalities can encroach severely on the capacity of the market mechanism to increase a society's welfare.
- Type
- Chapter
- Information
- Environmental EconomicsTheory and Policy, pp. 326 - 358Publisher: Cambridge University PressPrint publication year: 2010