How Convincing Is the Case That the Eradication of Pollution Should Be Left to the Market Mechanism?

“The social benefits of maintaining the supply of clean air will exceed the private benefits of doing so”. A statement which nowadays we all know is true but to actually achieve it is another. As far as the market mechanism is concerned we can see through the different market approaches towards sustainability, an extension to private property rights, environmental charges and green taxes how the market can benefit the eradication of pollution however the problems and consequences of these mechanisms highlight the extent how much of a common resource the environment is to us, the alternatives to market based mechanisms like the government also show problems in their attempts to eradicate pollution. So how efficient are the market mechanisms is eradicating pollution, are they just short term measures to gain “a green “identity for private profitability or are they working?

As we move forward into the future our change in society allow us to believe we want more material consumption, as we increase are consumption, which the majority are non renewable goods and the environment can only absorb so much pollution before it becomes dangerous and according to figure 1.1

The market mechanism aim is to minimize the extent after point w1 to achieve the government’s choice of a social efficiency market.

The market mechanism of extending private property rights by this we mean according to (Coase theorem) would have the effect of a socially efficient level of output being applied, shown by diagram 1.2.

From the diagram we can establish that if the output is less than the point Q3, the marginal profit for the polluter will be greater than the marginal cost to the sufferer. What the sufferer can do is impose a charge on the polluter only if the charge is greater than the marginal cost but less than the marginal profit. This market mechanism will benefit both sides but only to the equilibrium of Q3, anything greater will exceed the marginal cost to the marginal profit and no charge would help the sufferer. So in theory the equilibrium if achieved will create a social efficient output of pollution. But how significant and realistic is this?

Another mechanism used to help eradicate pollution is environmental charges to create the sustainability of the social efficient market, for this to occur the marginal social benefits and costs must equal. The marginal cost of the polluter using the environment has always been zero but yet it has external cost to the people. A charge will be imposed to counter act the level of emission from the polluter to prevent them going passed the point where social benefits are equal costs. (Social efficient level) however for these to reduce pollution they cannot impose charges based on a fixed rate the must charge per unit as illustrated in figure 1.3. The ideas behind this market mechanism show that it will encourage a reduction of pollution to benefit the people not only physically but financially. But is this convincing to every polluter?

The form of “green taxes”, which is when a charge is applied for any adverse effects of production on the environment. The effect that the tax has is an increase in price of the product from its original price. This mechanism aim to achieve a social efficient output means that the rate tax should be equal to the marginal external cost. This is another illustration of how the market mechanisms are used to reduce pollution however what is interesting is just how effective and realistic are they in today’s world.

The problem with “Coarse theorem” is the extension of private property is often impractical as it is most often that there are many more victims rather than just the one especially in an area with more than one polluter but what is more overwhelming