Table of Contents

I. Environmental Economics: 2

Tragedy of commons 6

Evaluation Process of Environmental Programs 6

Environmental Economics:

2. Sink-function:

We use the environment as a sink. Waste materials are often dumped into the environment. As an example, it can be said that we put our domestic wastage to the municipal cars (in India) and they use to dump it in a fixed place. Other than domestic sources, there are other sources too, viz. agriculture and industries from where waste materials are generated (Kolstad, 2000). They also use the environment as their sink.

Each and every point bears two common implications. The first one is that it has some benefits and the second one is that there is a certain cost assigned to it. Hence, it is the subject of cost-benefit analysis. Hence, typical economic tools cannot be applied here to describe this as it is (Mäler & Vincent, 2003). Thus, by using standard economic tools as weapons we need to tackle this cost-benefit analysis as there as separate functions associated with it.

Importance of Environmental Economics:

Environmental economics has a vast and revolutionary history as a subject. Going beyond neo-classical economics, development economics as well as growth economics, we need to study this part of economics tenderly. Neo-classical economics is the sole base of it (Kolstad, 2000). Growth economics deals with capital accumulation, rather physical capital accumulation and investing in human capital as the prior importance and development economics deals with its efficiency, equity, and sustainability. As per Heal (2007), Pareto-optimality is that state where one cannot be better off without reducing the benefit of other. But, environmental economics deals with a different sphere of the Economics literature. Recycling policy, climate change policy, nuclear power, and traffic congestion charging are the main issues which are discussed on the ground of economic thoughts in this section (Sandmo, 2015). Therefore, the economic policies and activities, affecting the environment, are the main concern to study this wing of Economics.

Key Questions for Environmental Economics:

Market Failure

Types of market failures

Externality

Public goods

Imperfect information

Another important reason for the market failure is the imperfect information or asymmetric information regarding a commodity in the market. According to Xinga (2011), the ‘market for lemons’ is the root cause of the existence of asymmetric information. A common example of imperfect information is the market for used cars. The sellers of used cars often provide inadequate information about the product to the customers. They often hide the loopholes and negative sides of their product and highlight the well-functioning parts of the product so that their used product can be sold at a highest possible price.

Tragedy of commons

Another important issue related to Environmental Economics is Tragedy of commons. In some situations, it is impossible to exclude the potential consumers from a common-pool resource and the cost of the exclusion is very high in this case. As a result, the flow of benefits is limited to a finite level (Ohler & Billger, 2014). Therefore, the rational consumers exhausted the resources for the common purpose of utility maximization. The most common example of the tragedy of commons is fishing (Abbott & Wilen, 2011). The fishing is the fishermen's interest in earning more income. More and more fishing provides more and more income and the fisherman is benefited more and more. As a result, this practice increases more and more with other fishermen and the main resource of earning (fish) is exhausted eventually. The worst consequence of this practice is the suffering of the global population.

Evaluation Process for Environmental Programs

References

Davies, W. (2013). When Is a Market Not a Market?: 'Exemption', 'Externality' and 'Exception' in the Case of European State Aid Rules. Theory, Culture & Society, 30(2), 32-59. http://dx.doi.org/10.1177/0263276412456567

Davis, P., & Reilly, A. (2010). Market power, market outcomes, and remedies in the UK groceries market. Agricultural Economics, 41, 93-108. http://dx.doi.org/10.1111/j.1574-0862.2010.00492.x

MaÌler, K., & Vincent, J. (2003). Handbook of environmental economics. Amsterdam: Elsevier.

Ohler, A., & Billger, S. (2014). Does environmental concern change the tragedy of the commons? Factors affecting energy saving behaviors and electricity usage. Ecological Economics, 107, 1-12. http://dx.doi.org/10.1016/j.ecolecon.2014.07.031