Chapter

Public Policy and the Environment: An Overview

Agnar Sandmo

in The Public Economics of the Environment

Published in print April 2000 | ISBN: 9780198297987
Published online November 2003 | e-ISBN: 9780191596858 | DOI: http://dx.doi.org/10.1093/019829798X.003.0001

Series: The Lindahl Lectures

Public Policy and the Environment: An Overview

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Environmental goods are public goods, which implies that each agent's contribution to environmental degradation is so small that it is rational for him to neglect it. But when everyone acts in this manner it gives rise to market failure; left to itself, the market system fails to allocate resources efficiently in the presence of externalities. These market failures can be corrected through the use of environmental or Pigouvian taxes. A diagrammatic analysis shows both the nature of market failure and the gains from efficient policies.

Keywords: environment; externalities; market failure; Pigouvian taxes; public goods

Chapter.  9272 words.  Illustrated.

Subjects: Economic Development and Growth

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