What problems do environmental issues create for economists? Essay

A) what problems do environmental issues create for economists

B) what solutions might an economist suggest for the problem of more and more cars using the roads.

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Environmental problems are different problems the environment is facing due to new technologies. These problems are pollution of the nature around us through smoke with harmful chemicals or due to loud noises from speakers or radio etc or from refrigerators and air conditioners at home which give out CFC chloro-fluro carbon which damages the ozone layer. Cutting down of trees to is environmental damage as each tree cut down is destroying shelter of a bird, the shade we could get from it etc.

Environmental issues are major problems for economists who study the depth of problems which can affect the economy and environmental problems do affect the economy to a great extent.

The following are the problems caused by environmental issues to the economists.

1) negative externality – externality occurs when full cost of production or full cost of benefit is not taken under consideration. This is when a good is produced taking into consideration only its private cost ( cost of producing the good ) and not considering its external cost ( that is the extra cost of the damages the good has caused while production). When the price of a good reflects both external cost and the private cost it is said to be social cost. Environmental problems are a negative externality. A negative externality is when the price of producing a good is more than what the initial price reflects. It is when a good is causing more harm than what you are actually paying for it.

Environmental issue is a negative externality therefore it is a major problem as the costs are more than what the people are paying for it.

2) costs occur in future: environmental issues are mainly caused by various pollution. We have to pay high prices for reforming these damages caused. If these environmental problems continue without a stop they can cause problems in the future. These environmental problems can cause global warming, which is a rise in the world temperatures, comes about when the green house gases such as carbon dioxide, methane acts as blanket around the earth trapping all the heat within the earth atmosphere.

If the temperature keeps on increasing the water would dry out and eventually every place would start turning into desserts. Ice caps on the mountain would begin to melt and would lead to massive floods etc. also gases like CFC coming out from refrigerators and sir conditioners can deplete the ozone layer which acts like a major protection against the ultra violet rays of the sun. these rays if not blocked can reach the surface of the earth and can cause skin cancer and various other skin diseases. This would lead to major loss of lives of people and animals and this would cause a great harm to the economy. Therefore environmental problems are a major threat to the economists.

3) Environmental problems are difficult to locate. Sometimes the damage of the environment in a particular place is not due to pollution in the place but due to pollution from places away from the place where the damage occurs. E.g.: smoke emitted from a chemical plant in Indonesia can cause harm to the environment in Malaysia. to Malaysia it would be a problem caused by the country’s resources and the Malaysian government would impose taxes on the resources causing pollution but the pollution might continue. The causes of these problems are difficult to locate therefore the economists cannot find possible solutions to the pollution caused. As per the example the Malaysian government might be unaware of the pollution being caused by the Indonesian chemical plants. So the government doesn’t know how to treat the problem even after it has taxed its own resources. The economists may fail to study the depth of the problem of the pollution caused because of problems caused while locating the cause of pollution.

4) These environmental problems may also lead to issues for the economists because often the cost of the damage caused in a country has to be paid by that particular country even though it is not the polluter. Taking the above Malaysia example the price of the damage caused by Indonesian chemical plants have to be paid by Malaysia who is taxing its own plants for the damaged. Therefore if it is difficult to locate the polluter then the country which is polluted has to pay the price.

All these are the various problems caused to an economist with regard to environmental problems it is a negative externality that is the social cost is greater than the private cost, the cost of the damage may cause problems in the future, it is difficult to locate the cause of the pollution, the cost of the damage is paid by the non polluter. All these lead to problems with the economies and can cause market failure so they are a great threat to the economists.

Recently cars are used on a massive scale for transportation as they are quicker and more convenient than public transport. Cars are used for both official and leisure use. These are the advantages of a car but cars have disadvantages too. The petrol used in the car contain lead which damages the brain. Cars cause a lot of air pollution. It emits out harmful gases like carbon monoxide from its exhaust which affect the brain. the problem is that now a days the use of car has increased to a great extent causing a lot of road congestion as well. The economists in order to reduce this increase of cars which would further lead to congestion and pollution have comes with few plans to reduce the use of cars

1) Road pricing : road pricing is in way licensing people to enter a certain area. It is in a way taxing people to enter certain areas of a town etc. it could be through parking tickets or by electronic devices which would tax for entering the area. Eg: ERP in Singapore which makes people pay a certain fee in order to enter the busy town areas during peak hours. The electronic road pricing system deducts a certain price from the card in the meter depending on the time of entry in the zone. At peak hours the rate would increase considerably. This would discourage people from entering the particular zone and therefore encourage them to use different means of transport.

2) Increase taxes or duties on the petrol being used. Keep the taxes on petrol very high and in this way discourage people from using cars because if petrol charges increases the demand for cars will automatically decrease as petrol and cars are complementary goods. The increase in price of a good would reduce its demand and thus reduce the demand of its complementary good as well. People will prefer to travel in something besides cars in order to avoid the heavy taxation.

3) Taxing car parking areas. this would discourage firms from providing car parking lots or spaces and as a results would not let the motorists achieve their objective that is if there is no car park motorist may find it tedious to get parking space and therefore the motorists would prefer not traveling by car.

4) Improve the public services is also an option to reduce use of cars. If the public transport are made more efficient and convenient then people would prefer traveling by public transport rather than paying so many taxes on traveling by car. You could also minimize the cost of traveling by public transport and therefore allow more people to travel by it. Also the taxes collected by the cars can be used in the development of the public transport.

5) Increase taxes on cars, by increasing the prices of the cars by taking into consideration the social cost and not only the private cost. Make the consumers pay the external cost caused by the cars. Therefore discouraging them to buy cars in the first place

All these are ways put forward by economists for reducing people from using cars by taxing complementary goods like petrol and also by taxing car parks and then by improving and subsidizing public transport and by having road pricing policies to have a license or electronic devices to put prices on cars


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