Environmental Economics - Essay Example

Environmental Economics Introduction In order to attain sustainable economic growth and development, the environment needs to be put in consideration when making major economic decisions. This is because the resources that the economy employs are largely derived from the environment. In addition, the wastes that economic processes produce are disposed off in the environment. This has had significant effects on the quality of the environment. Currently, the population faces the threat of resource depletion and increased environmental pollution. To a great extent, this has impacted on the quality of life of the population. The market economy has various implications on the general wellbeing of the environment. Relative effects are both negative and positive. Although negative effects are apparent in the short run, positive effects are more pronounced. It is against this background that this paper reviews the impacts of the market economy on environmental protection. To enhance a harmonic view, it begins by reviewing the negative effects and then proceeds to evaluating the positive effects. The market decisions place emphasis on increased production. According to Morgen, Pizer and Shih (1998), increased economic production implies an increase in production of wastes. This contributes to environmental pollution and resource depletion. Although incomes are likely to rise, environmental protection remains at risk. Under-valuation of natural resources has made it difficult for the environmental damages to be addressed effectively. The profits that firms and producers enjoy are not reflective of the environmental damages that production processes impose on the environment. In this consideration, market decisions compromise the wellbeing of the environment. In his research, Kolstad (2010) indicates that the market economy has had significant negative effects on the holistic wellbeing of the environment. This is attributable to the fact that consumers and firms make consumption and production decisions without involving important environmental considerations. Relative determination is solely based on market supply and demand. In most cases, consumers and firms pay attention to environmental problems only when they become complex to the extent of them being reflected in the prices of the products. Ideally, the environmental and naturally resources are considered public property (Harrington, Morgenstern & Nelson, 1999). For this reason, nobody takes responsibility for the negative effects that they suffer. It is contented that waste of important natural resources and resultant environmental destruction dis-economises the society. From an economic point of view, this undesirable status has the ability to reduce the marginal cost of economic firms and instead increase the consumer’s marginal utility. Thus market economy does not have the ability to address the various concerns that are related to resource sustainability. While the environment places emphasis on the need for resources to benefit future generations, market economy considers the benefits of the environment to present populations only. In this respect, market decisions greatly harm environmental wellbeing and undermine its protection. Besides the preceding negative effects, market decisions also promote environmental protection in different ways. Notably, the government has a stake in market decision making. Relative environmental departments push for formulation and implementation of environmental regulation. Its provisions require that individuals and firms who engage in environmental pollution and destruction be punished accordingly. Stringent laws can culminate in investment in environment protection by economic firms. In addition, respective firms assume environmentally sound practices in order to prevent the economic losses that are associated with violation of environmental protection laws (Lomborg, 2001). Seemingly, decision making under the market economy is done by the government in collaboration with the firms and corporate agencies. The punishment to accord environmental law violators in most instances is determined by the investors of the respective firms. Relative decisions are in most instances informed by market trends. Arguably, market economy allows for annexing and bankrupting of firms that violate the legal provisions of environmental protection. This goes a long way in protecting the natural resource base as well as the environment in general. As aforementioned, the market economy advocates for increased economic production. In their review, Copela and Taylor (2004) argue that economists tend to rely on the environment for natural resources. It is unlikely that they would damage the environment and fail to take any measures to restore the same. The urge for increased production would probably compel them to engage in environmental protection. Market conditions force them to restore the environment in order for them to have continued supply of natural resources. Under the market economy, industry growth and development is solely undertaken by the market actors. In instances where environmental regulations are pt in consideration from the very initial stages of planning for industry development; this can have significant positive impacts on environmental protection. In this respect, Gray (2002) indicates that the managerial facet of the industry ensures that the prices of products are inclusive of environmental protection initiatives. Thus market decisions in this regard greatly foster environmental protection. Finally, markets are best positioned to protect the environment because they understand the implications of their activities better than the government. In his study, Acemoglu (2003) argues that firms pursue different production activities. They understand the volume of the wastes that they emit in the environment as well as the volume of the natural resources that they use. Since they have this knowledge, they understand the most viable environmental protection approaches that they can use to counter the scenario. Although environmental regulations are effective in addressing these concerns, relative approaches can yield better outcomes if environmental protection is left in the hands of the firm. Arguably, customized environmental protection approaches are efficient and more effective than the command-and-control laws that are imposed by regulatory bodies (Dasgupta, Laptante, Wang & Wheeler, 2002). Market decisions in some cases propose that environmental protection should be the responsibility of firms and other producers. In this consideration, relative decision makers understand that market actors have the knowledge and sufficient resources to address environmental problems and foster environmental protection. Conclusion Notably, the positive impacts of market decisions to environmental protection are more pronounced than the negative implications. In sum, effective environmental protection can be achieved when the market actors work in collaboration with the government. As it has come out from the study, market decisions have both negative and positive impacts on the wellbeing of the environment. By undervaluing the natural resources, market decisions have promoted resource depletion and increased environmental destruction. However, market decisions encourage environmental protection because relative production relies heavily on the natural resource base. The fear of facing the negative effects associated with violation of environmental laws makes the market economists to uphold environmental protection. Finally, the market actors are in the best position to protect the environment because they understand the implications of their activity to the environment better. References Acemoglu, D. (2003). Directed technical change. Journal of the European Economic Association, 1(1), 83-86. Copeland, B. & Taylor, M. (2004). Trade, growth and environment. Journal of Economic Literature, XLII. Dasgupta, S., Laplante, B., Wang, H. & Wheeler, D. (2002). Confronting the environmental Kuznets curve. Journal of Economic Perspectives, 16. (1), 16-36 Gray, W. (2002). The economic costs and consequences of environmental regulation. USA: Ashgate Publications. Harrington, W., Morgenstern, R. & Nelson, P. (1999). On the accuracy of regulatory cost estimates. Resources for the Future Discussion Paper, 99-118. Kolstad, C. (2010). Environmental economics. Oxford: University Press. Lomborg, B.(2001). The sceptical environmentalist. Cambridge: University Press. Morgen, R., Pizer, W. & Shih, J. (1998). The cost of environmental protection. Resources for the Future Discussion Paper, 98, 36. Read More