Environmental Economics

As global warming and climate change are becoming vital issues, more people that are becoming interested in environmental econonics. There are plenty of things that you can do to make sure that you are conserving the natural resources around you.

One of the most important things to understand when it comes to environmental economics is the concept of market failure. This is when markets don’t use the resources they have in the most effective ways.

This happens when one industry does not use natural resources for the greatest social welfare, which is evident in industries that involve the continual use of oil or gasoline. Market failure is a heated topic of discussion for a number of economists, because it has been proven that what an individual will do with a natural resource is often not what society would want that person to do to protect the resource.

For instance, a man running a gas station that is the family business will most likely sell gasoline at the highest point possible to support his family. However, this causes a strain to the possible patrons in the neighborhood, since the high prices may compromise the family budget.

Externality is another property of environmental economics that you’ll need to be aware of. This principle occurs when a person makes a choice that involves or effects other individuals that are included in the market price of the choice. For example, a large factory or corporation that produces a lot of pollution is probably not taking into account the fact that the polluted air is costing other members of society. Because of the factory, more people in the city or state will need to start driving hybrid cars to cut down on emissions, and may have to spend more money on items for their homes that will help them to ‘go green’. Again, this will affect the family budget, which will affect how consumers are able to spend their money outside of the home.

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