Solve Some Of The Pollution Problem example essay topic

Should the problem of pollution - air and / or water - be dealt with by governments or with markets? This is a question that is obviously controversial and can be argued about till the end of time. Economists have been and still are debating amongst themselves about which method is the most efficient and productive way to solve this problem. Some say that the market can take care of it by itself, and others say that the government needs to intervene and take care of it directly. So what is the correct answer? I say that neither one is correct alone.

There needs to be a combination of government intervention with the market in order to effectively handle the problem with pollution. The government has tried to be the one to solve this problem in the past. Several different methods have been used and implemented in the attempt to clean up the air and water to better our way of living. Many laws were implemented and passed by Congress that were supposed to set lofty goals and rigid technological standards. These command-and-control measures that government officials use are supposed to regulate the amount of pollution that is being consumed by society. These methods regulate how much pollution each individual firm would be permitted to emit.

The problem with this method is that some firms due to the nature of its kind, put out a lot more pollution than others. These methods have been very successful in cleaning up the air and water in rich countries, but have notably failed in dealing with waste management, hazardous emissions, and fisheries depletion (The Economist). Also, the gains achieved have come at a needlessly high price. One of the biggest problems with leaving the pollution issue totally up to the government is that the price is hardly ever set at the right price. If the government is the one to set the price and not the market, then the price will generally be quite a bit higher than is would be had the market set it. It has been proven very expensive for the government to take on this problem alone.

As countries grow wealthier, the people start clamoring for a cleaner environment. But because the cheap and simple things have been done, such as dirty air and water issues, the peoples' rising expectations of a cleaner environment becomes increasingly expensive. Governments can start to ban dirty activities, or force companies to use "clean" technology, such as catalytic converters in cars. But regulation tends to make polluters use a specific technology, rather than investing in cleaner production methods, and it often forces all polluters to undertake the same sort of clean up although the costs may vary enormously. The market on the other hand, cannot take care of the pollution problem alone either. If we leave the pollution problem up to the market alone, then it most likely won't get taken care of.

People won't pay money they don't have to, just to have a cleaner environment to live in. In this world of money hungry business people, clean air is not exactly what they have on their priority list. They are too focused on how to keep money coming in rather than spending it pollution control, especially if they would have to spend a significant amount more than the next guy. Everyone wants a cleaner environment, but nobody wants to be stuck paying more than others.

So who decides? In the market, people are looking out for their best interests. They want to maximize their profit. So there needs to be some kind of regulation involved.

"Leave it to the market" is bad advice. For a market to deliver on its public-policy promise, the government must design it well. A market can provide only part of the solution to a public problem. With pollution rights, the market does its job only within the framework of continued government action (McMillan).

Governments and the market working together results in a very sufficient pollution control method. One example of this is the Clean Air Act of 1990. This eliminated the command-and-control method, under which the EPA had directly regulated each polluting firm. It created a market in the rights to pollute. The act brought in emissions allowances that were licenses that allow the holder to emit only so much pollution each year. The allowances were freely tradable.

Anyone could buy or sell them, or bank them for future use. The government simply decides what total nationwide level of emissions is acceptable, and lets the market decide how much each plant cuts back. This allows those firms to pollute more than their assignment, and others to pollute less, so that the target reduction in total emissions is achieved at the lowest possible cost to the industry. Problem solved. Another way government and markets can work together is by implementing pollution taxes. By shifting taxes from employment to pollution, the price is now a reflection on externalities.

Sweden introduced a sulfur tax a decade ago, and found that the sulfur content of fuels dropped 50% below legal requirements (The Economist). Even though the word "tax" is still looked on as a bad word in America, its benefits could be great. The point is not that there should be no pollution at all, but rather to make polluters face the true costs of what they do. Taxation is one way to do that. The government wouldn't have to raise revenues from other taxes such as income, payroll, etc., but can cut other taxes and still raise the same total amount from these pollution taxes. These taxes signal to polluters that the environment is valuable.

One other way to help solve some of the pollution problem is for the government to issue out property rights. These property rights create incentives for individuals to be good custodians of nature. These property rights can be freely traded, and can allow groups to protect and preserve wilderness and water. The absence of property rights can lead to tragedy.

One example is the offshore fisheries. When it is free game for these fishermen, then the waters are well over-fished and result in a depleted area. If left up to the market alone, then too many people looking for their best short-term interest will over-fish. But implementing property and fisherman rights to a certain quota, helps reduce over-fishing. Even though fishing has nothing to do with pollution, the same principle explained here applies. So who should the pollution problem be left up to?

I think that through this paper it is obvious that to leave it up to one or the other would result in a less effective and efficient outcome than if government and the market combine together. Let government set the framework, and then let the market decide the rest. This will help solve the pollution problem better than any other alternative.

Bibliography

McMillan, John. "Using Markets to Solve Public Problems" June, 2001.
The Invisible Green Hand" The Economist, July 4, 2002.