Environmental Problems Can Best be Dealt with by Market Forces Rather than Government Intervention

Topics: Externality, Market failure, Welfare economics Pages: 2 (727 words) Published: March 17, 2013
Assess the view that the environmental problems caused by the disposal of rubbish can best be dealt with by market forces rather than by government intervention

Market forces (a free competitive market) can make their best efforts to deal with environmental problems by trying to cut their external costs so they have minimal negative externalities. However, government intervention and taxes can also play a role in reducing the environmental problems. Market forces operate with one motive which is to make profit at which supply will try to satisfy demand and will form an equilibrium at which social costs might be excessive. Market forces will try their best to minimise their costs so they may dispose their rubbish in the cheapest way possible and create environmental problems whilst in the process. In my opinion this would be best dealt with my government intervention rather than market forces. Environmental problems created include waste; businesses that manufacture and create products at some point during their manufacturing process will manufacture waste. So businesses will have to decide what to do with this waste, whether they recycle it, safely dispose it or sell it to other manufacturers as raw materials. Other examples of environmental problems include pollution. Manufacturing processes often generate air/water emissions. Other environmental problems include resource depletion in which scarce resources are being used up. To a large extent, environmental problems are the result of market failure (insufficient allocation of resources in a free market). If the price paid fails to cover the full, social, cost of production there will be a negative externality. Therefore, consumers get it at price less than the full cost of production but if the price was any higher consumers would choose to buy less of it. If market costs do not reflect true costs and benefits to society there will be a misallocation of resources and market failure leading to infringements...
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