THE GOVERNMENT AND POLLUTION
Pollution is a very tough topic in today’s market and in my personal opinion; Government should intervene for the following reason. Let's take the example of a company that manufactures blue jeans at a factory location on a river. The problem is that, as a byproduct of its manufacturing operations, the factory dumps chemical pollutants into the river. But no single person or entity owns the river water, so there is no one to force the company to stop polluting. Moreover, since cleaning up the river would cost money, the company can sell its paper products more cheaply than if it had to absorb such pollution control costs. As a result, the paper company can further increase its output, responding to the relatively higher demand at its lower prices, leading to more waste and pollution from its factory. By polluting without penalties, the company may also have an unfair advantage over competitors whose paper products do reflect the cost of installing pollution control equipment. This is a classic example of a so called external cost that is not reflected in the price through normal workings of the marketplace. Neither the paper company nor its customers are bearing the actual cost of paper production; instead, a portion of the cost, the pollution factor has been shifted to the people who live or work along the river and those taxpayers who eventually are stuck with the cleanup bill. Like other externalities, pollution often occurs where the ownership of a resource, in this case the river is not held by individuals or private organizations. Public lands and roadsides, for example, are more often littered than the lawns in front of people's homes, because no one person owns these public lands and takes the responsibility for keeping them clean, and prosecuting those who despoil them. Most pollution is, in fact, released into the air, oceans, and rivers precisely because there are no individual owners of those resources who have strong...
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