environment

Carbon Tax – Pros and Cons

Carbon Tax – Pros and Cons

The production of carbon dioxide is widely held to contribute to social/environmental problems such as global warming. This carbon pollution is a negative externality. It is a cost imposed on the whole of society and not just the individual who consumes a certain product. e.g. if you drive a car, the external costs are felt by everyone else. Because certain carbon-intensive industries create negative externalities, the social cost of production is greater than the private cost. In a free market, these negative externalities encourage in the price leading to overconsumption and…

How can an economist save the Rain Forest?

How can an economist save the Rain Forest?

Readers Question: Endangered rain forests, wild fish, elephants and more are examples of the tragedy of the commons. What would economists recommend to save, rain forests or fish stocks?   Firstly, the tragedy of the commons  is a situation where there is overconsumption of a particular product / service because rational individual decisions lead to an outcome that is damaging to the overall social welfare. The problem with rain forests is that people may feel…

Economics and the environment

Readers Question: Is it possible to construct the economic system so that does not rely upon expanded growth which as we all know, is damaging the environment? causing pollution e.t.c. Could we have a society without economic growth? or as economists might prefer to answer – Can we have environmentally sustainable economic growth? To promote an economic system without economic growth isn’t necessary. It is possible to have economic growth (increased output and living standards) whilst…

Global warming and tax cuts on petrol

Global warming and tax cuts on petrol

The other day, I had a quick glance at the newspaper headlines, whilst in a service station. UN Report on global warming states global warming is a real threat to the future of the planet. To contain these changes will require “substantial and sustained reductions of greenhouse gas emissions”. Chancellor announces yet more freezes on fuel duty. It seemed a paradox to have both headlines on the same day. At the very least, we could enable a small increase in tax on fossil fuels causing the problem.

Polluter pays principle (PPP)

Polluter pays principle (PPP)

The polluter pays principle  (PPP) is a basic economic idea that firms or consumers should pay for the cost of the negative externality they create. The polluter pays principle usually refers to environmental costs, but it could be extended to any external cost. In a purely free market, you would only face your private costs. However, for goods with negative externalities, there are additional external costs, e.g. damage to the enviornment. This means the social cost of some goods are greater than…